Preserving and building affordable housing, a challenge in relatively normal times, has gotten harder as rents skyrocket, competition for land heats up and construction costs rise.
According to Bizjournals, the U.S. has a shortage of 6.8 million rental homes for extremely low-income renters, or households earning at or below 30% of their area median income, according to a National Low-Income Housing Coalition report from earlier this year. That doesn’t account for households at 60% AMI, 80% AMI and 120% AMI, the latter two of which are considered workforce housing levels.
A persistent lack of affordable housing results in renters being cost burdened, or paying more than 30% of their income on housing costs. The NLIHC says 70% of extremely low-income renter households are severely cost-burdened, which means spending 50% or more of their income on housing.
With metro areas seeing double-digit growth in rental and for-sale home price appreciation, the needs have accelerated.
“The pandemic gave rise to a huge increase in both the price of for-sale housing and rents of rental housing,” said Eric Maribojoc, executive director of George Mason University’s Center for Real Estate Entrepreneurship. “Both of those have gone up by double digits because of suppressed demand. All of a sudden, there are even more people whose wages have not kept up with the jump in the price of for-sale housing and the rates of rental housing.”
Asking rents for move-in leases in apartments rose 13.9% year over year in November, an all-time record pace, according to RealPage Inc. Meanwhile, the median home-sale price nationally hit a new all-time high of $360,250 the week ending Dec. 4, up 14% year over year and a 30% increase from the same period in 2019.
Matt Rieger, president and CEO at Miami-based Housing Trust Group LLC, which develops market-rate and affordable housing, said recent challenges relating to construction costs, supply-chain issues and hot multifamily demand have exacerbated challenges of building below-market-rate units.
“It’s gone from complicated to nearly impossible,” he said.
Rieger said, for projects in the affordable space HTG is working on, the company has to take a long-term view — negotiating contract extensions on land sales and locking in lumber pricing as early as possible, for example — to try to manage costs.
But, he said, there’s a bigger problem: the federal low-income housing tax-credit program needs to be expanded, bolstered and fine-tuned.
The social-spending portion of the federal infrastructure bill, Build Back Better, has more than $150 billion earmarked for affordable-housing efforts. But members of Congress continue to debate and negotiate over aspects of that legislation.
The bill calls for expansion of housing vouchers, in addition to building, preserving and improving 1 million-plus affordable rental and for-sale homes, as well as several LIHTC provisions.
“All eyes are on Build Back Better,” Rieger said. “(But) even if they gave (the industry) all of the resources — a blank check — it would be years before we got through the drawings and the permitting and the zoning and the construction” to build new affordable units.
Beyond LIHTC, some industry groups are lobbying for other aspects of the legislation to be reintroduced.
A number of industry associations — including the National Housing and Rehabilitation Association, which represents affordable housing and multifamily owners and developers — sent a letter earlier this month to Democratic leadership asking for historic tax-credit enhancements to be reinstated in Build Back Better.