A Menu of Ideas for Addressing the Affordable Housing Crunch

Nancy Burke, VP of Government & Community Affairs at the Colorado Apartment Association, wrote an article for the Colorado Real Estate Journal that summarizes the challenges faced by the multifamily industry in terms of developing affordable housing and offers a nice overview of the many different approaches being taken around the country to address the ever-increasing demand for affordable housing solutions. Here’s a taste:

Thirty-two percent of multifamily construction cost is from regulation. The National Association of Home Builders and NMHC states regulation imposed by government accounts for an average of 32.1 percent of multifamily construction costs. Building codes, development requirements, impact fees, inspections and other fees contribute to this highly regulated industry, which translates into higher rents and reduced affordability.

Lack of labor, land prices and costs of materials have increased over 30 percent in the past two years. The not-in-my-backyard movement and moratoriums placed on multifamily construction equate to millions of dollars in legal fees and slows the time for units to reach the market. Blocking new development doesn’t keep people from moving in, but it usually prices people out of the neighborhood. Building more lessens the likelihood of displacement and gentrification…

The U.S. Department of Housing and Urban Development created a “landlord task force” to look at incentives and reduce regulatory requirements in the complicated process of offering housing choice vouchers. Onboarding each renter costs nearly $1,300.

Minneapolis incentivizes landlords to retain a 40 percent tax abatement if 20 percent of the units are set aside for 60 percent area median income or less, for a 10-year term.

New Orleans is constructing a co-living roommate model arrangement in a multifamily building near downtown. It features furnished rooms, paper products and house cleaning for under $1,300 per month. Management is working with AirBnB to allow residents to rent their rooms and retain 75 percent of the proceeds…

Denver is a point of reference in affordable housing solutions, too. City Council recently adopted the Lower Income Voucher Equity Denver program, the first-of-its-kind, public-private partnership highlighting an integrated, transitional, two-year affordable housing model that is being considered in other cities. It is designed for working citizens earning $23,000 to $67,000 (40 to 80 percent AMI) that leverages employer and foundation support to buy down rents.

 

Housing Affordability a Growing Issue in US

If you’ve been paying attention to the housing market at all then you know that rents are up. In some markets way up, and that’s becoming a growing point of concern with those who study housing in the US. From an article at The Atlantic:

A recent report from the Joint Center for Housing Studies (JCHS) at Harvard, puts some numbers on just how bad this problem is: About half of all renters in the U.S. are using more than 30 percent of their income to cover housing costs, and about 25 percent have rent that exceeds 50 percent of their monthly pay…

A big part of the problem is that fewer households are making the transition from renting to owning, which means more competition for limited inventory—driving rental prices up. Renters who would previously be able to qualify for mortgages are either finding that mortgage lenders are still super strict post-recession, or that there simply aren’t many homes in their price range—or both. “In normal times when homeownership was achievable you could get a starter home for between $150,000 to $250,000,” says Andrew Jakabovics, a senior director at Enterprise Community Partners, a nonprofit that focuses on affordable housing. “That segment of the market is basically dead.”

So instead, households with higher incomes and dreams of white picket fences remain in the rental market. Those households take up available units in the mid-to-high price ranges, for which they can afford to pay a premium. In fact, renters with incomes that top $75,000 are among the fastest growing group in the market, says Chris Herbert, the managing director of the JCHS. “Developers will be drawn to build the houses that provide the highest returns,” he says. That means not enough new apartments are affordable apartments that can accommodate low- and middle-income residents. Instead, high-priced luxury units get built first, pushing rents up and middle and low-income earners into apartments that are more expensive than they can afford. Sometimes this means pricing them out of cities altogether.

The situation in secondary and tertiary cities like those here in the Piedmont Triad isn’t as constrained as in some of the major metros like San Francisco, but it’s still an issue. Rents here are up in general, but relative to other areas of the country – even our neighbors in Raleigh and Charlotte – the rise in rents has been moderate. Still, we face many of the same issues outlined in The Atlantic article and housing affordability is likely to be a topic of concern for our local leaders for the foreseeable future.