Why Affordable Housing Needs To Be Addressed On Multiple Fronts
Why Affordable Housing Needs to Be Addressed on Multiple Fronts
by Jerome Ryans, President & CEO, Tampa Housing Authority
If you talk to the people who are bearing the brunt of the housing crisis, you will quickly realize that a myriad of factors have brought us here, from low housing supply to tax credit expiration to labor shortages. This is an incredibly complex problem - one that likely cannot be solved with a silver bullet that will provide equitable supply of affordable housing for good.
Responding to the demand for affordable housing is a humbling issue for anyone seriously trying to resolve it, because it cannot be done by a single either/or solution, but rather it requires several both/and solutions. No one can do it alone, collaboration is essential.
If we want to be efficient in addressing the housing crisis, we will need to be open to approach the problem from a variety of angles. On the plus side, this opens the door to contributions from a diversity of parties, agencies, and individuals in both the public and private sectors.
One of the major fronts from which we can approach this issue is through the lens of supply and demand. Part of solving the affordable housing shortage is to increase housing supply. This may sound more easily said than done, but there are a multitude of strategies available to increase the amount of affordable housing on the market.
Build More Affordable Housing
Let's start with the most direct route: simply building more housing, bringing down costs as supply goes up. What is standing in the way? A lot of this comes down to simplifying regulations and creating incentives for developers.
You likely understand that part of housing prices is determined simply by consumer whims. A surge of people suddenly wanting to live in a neighborhood because it has become "cool," a new commercial real estate development lures new residents, or school district changes make a place more appealing for families. Private developers technically have the right to charge whatever consumers will pay. However, this is how extreme price bubbles tend to form.
For a developer to offer consistent affordable housing, they need to be somewhat insulated from the ups and downs of housing market trends. This is where the Lower Income Housing Tax Credit enters the picture. It's a major incentive for developers to participate in affordable housing programs.
When developers accept this tax credit, they can use it as a selling point for investors to acquire funding to renovate and/or build new rental properties. The investors can claim the LIHTC over the years once the property is functioning.
These properties must be rented to people who fall within a certain percentage range of the area median income (AMI), adjusted for family size. Rent prices also cannot exceed a certain amount of the AMI. Developers must comply with these rent requirements for a limited amount of years, usually less than 20, and many states pass extensions to further LIHTC compliance.
As you can imagine, increasing access to and the longevity of the Lower Income Housing Tax Credit is one major way to help grow the supply of affordable housing. Some even suggest extending LIHTC duration in perpetuity, which would make affordable housing new builds less attractive to developers. Land shortage is another common barrier for this solution.
Address Shortage of Construction Workers
When there is land available and builders can find financing for affordable housing projects, a decrease in the number of people working construction in recent years has been a huge factor in limiting the amount of new developments - affordable and otherwise - that can be built.
The solution to this may depend more on the labor standards in your region and at specific companies. All will need to reach toward a common goal: stimulating the employment of construction workers with technical program outreach, wage increases, and employee benefit offers.
On the other side of the equation, we must find ways to help renters and potential homebuyers better afford the housing that is available in their area. How can this be achieved?
Increase Access to Rent Assistance
An intrinsic part of the equation is exponentially increasing funding to rent assistance programs so that they are available to more individuals in need, but doing this alone is not enough. We must also work to simplify the application and recertification processes for both tenants and landlords alike. We also need to staff housing authorities and other organizations managing these programs accordingly, so they can be effective in helping people timely.
Support Home Ownership
Empowering lower income families demands supporting homeownership whenever possible. Be it tiny homes, mixed-use developments, contemporary manufactured housing, or other similar options-all of these are creative solutions that can effectively help increase housing supply with space and cost efficiency.
A large part of achieving home ownership is financing. As anyone who owns a home can attest, mortgage payments can be equal, or even lower, than rent payments. What stops many potential homeowners is the struggle to save up for the initial down payment. The good news is that this problem can be addressed on multiple public and private fronts.
In the public sector, we can open access to Federal Housing Administration (FHA) loans by increasing the number of lenders who offer them and making the process to apply easier. These loans for first-time home buyers include very low down payment percentages - as low as 3.5%, compared to the traditional 10-20%. Along with these, we can expand income-based mortgage loans that require even less - sometimes no down payment at all.
Social-impact driven companies have also stepped into the role of helping potential homeowners, leading the way in the private sector with programs that help teachers and other essential workers land a home with down payment assistance, for example.
While private companies do not have to be held to the same standards as public agencies, we don't have to descend into a debate over which solution is morally or financially "better." Instead, we need to look back at our original message: use every tool available to ameliorate the affordable housing crisis.
Secure Housing for the Most Insecure Communities
It is worth giving special focus to populations who struggle to secure housing the most, like those with disabilities and homeless veterans. According to the CDC, almost 30% of the adults in the U.S. have some kind of disability - this is a significant segment of people who may struggle to work full-time and afford housing and basic needs. Additionally, between 11-21% of houseless adults in the U.S. are veterans. This is due to rising poverty among veterans.
Allocating financial and logistical resources through public, non-profit, and private agencies will likely yield the most fruitful results; that is, housing the highest number of vulnerable people.
Eviction may sound like a tangential legal matter to housing, but the reality is that, once a person loses their initial housing, it becomes exponentially more difficult to regain it. Having a home helps a person build and keep wealth. Losing a home often means that a person's possessions, time, and energy become more scattered.
Thus, if we can help a person remain where they live, they are more likely to recover financially - and at a faster rate. Ways to help prevent evictions include:
● Community-based outreach programs that help struggling tenants with early legal intervention
● Making financial safety nets available to a greater number of renters
● Partnering with landlords to help them understand that an eviction can actually be more costly than working with a tenant who is behind on rent
● Addressing the reasons why tenants may fall behind on rent with education, training, and job assistance programs
Use Many Diverse Housing Solutions to Solve a Complex Problem
As you can see, solving the affordable housing crisis in a manifold way starts to reach into areas that might seem unrelated to housing, like education and unemployment. It will take more than sole efforts from housing agencies or public funding to create sufficient affordable housing, but with the combined efforts of public, private, non-profit, and grassroots organizations, we can tackle each obstacle and achieve so much more.
Keyword: diverse housing solutions