Affordable Housing Part 4: Location, Vocation and Motivation
Note: This post is the fourth part of a series focusing on affordable housing in the US. You can read other parts looking at the surprising amount of support affordable housing has in the US here, the unexpected impact lower-cost housing has on existing housing costs here. and the beginnings of a neighborhood movement to put affordable housing in unusual places here.
America doesn’t have enough houses for the people who want to buy them – we are about 3.2 million homes short. The country doesn’t have enough affordable housing units for those who want to rent them – we are about 7.3 million short. Among those who are already in rental housing, about half, mostly people making $30,000-$75,000 a year, spend more than 30% of their income to pay for housing costs. Of those paying at least 30% for housing, 54% pay more than 50% of their income.
The affordability of housing has been a problem for a long time, but it has gotten a lot worse over the past generation as real wages stagnated and new construction slowed, and over the past few years as the pandemic hit and mortgage rates went up.
Almost everyone agrees we need to do something.
Some 82% of Americans (and a rare majority of both Democrats, Independents and Republicans) agree high housing costs are a “huge” problem. Some 72% of them agree it is a big problem in their community.
The question is: what might we do about it? Here are three areas where work needs to be done if we are serious about addressing the problem.
1. Train up more builders
Since the great recession of 2008, housing starts in the US have plunged. One of the biggest reasons is that people leaving the building professions are not getting replaced. Forty percent of those in the skilled trades are 45 years or older (think electricians, roofers, plumbers and cement masons), and they’re not getting replaced as they age out: applications to train for the skilled trades were down 49% between 2020 and 2022. In all, industry insiders say they are more than 500,000 workers short of what they need to meet demand.
This is a challenge for construction generally, but an even bigger challenge for affordable housing: with limited employees, firms are more likely to build more expensive, higher margin projects.
We need a massive effort to recruit more people to the building trades. Here’s part of the argument I made in an earlier post:
· At a time when automation is lurking in so many traditional manufacturing sectors and increasingly in historically white collar professions, construction appears comparatively safe from automation (though there is considerable promise in more efficient assembly of parts of homes offsite);
· At a time when men are resisting the call to the fast-growing HEAL professions (see this post), construction jobs offer a more traditional alternative.
· The jobs pay well; about 80% more than the average non-farm job.
Getting this message out to potential workers is going to require the collective efforts of private companies and government at a local, state and federal level. We won’t ever be able to have enough affordable housing if we can’t rehab it or build it.
2. Find more locations to build, renovate, and preserve affordable housing
Zoning barriers make it really difficult to build more affordable housing in places where it hasn’t been. We have enacted so many restrictions: we’ve capped the number of cars that can park in front of houses; limited the distance between homes or from homes to curbs; restricted the number of units or size of units that can be built on lots; specified the sort of building materials that can be used. And we’ve put in place permitting processes that slow proposed affordable housing projects so much that developers and builders can’t afford to build them.
Some of these regulations make sense — we want neighborhoods to have some logic and beauty — but the collective impact of them is that they make building new affordable housing almost impossible.
· Ease zoning restrictions: Our knee jerk NIMBYism (see Part 2 and Part 3 of the series) and what one reader called YIYBYism (Yes, but in Your Back Yard, not mine!) makes it harder to ease zoning on a local level, but at a state level, leaders can take a broader view and begin slowly easing some of the bureaucratic snarls that cause the biggest slowdowns.
· More incentives for infill: Every city has blocks of blight; abandoned buildings that have fallen into disrepair or disuse. Some of these properties are already owned by the city; if they are not they have the advantage of motivated sellers. And compared to new housing built in the suburbs or exurbs, these sites already have power and water lines, are closer to existing jobs and are on public transportation routes.
· Find ways to preserve existing affordable housing: In the wake of the pandemic, corporate entities started buying up single family homes and turned them into rentals: so far they have taken 700,000 single family homes off the sales market, and they are picking up the pace; by 2030 there will be 7.6 million fewer homes available to buy. Fewer homes available for purchase means more competition and higher prices for the homes remaining. Meanwhile affordable rental housing units, like the ones on my block (see Part 2), are vulnerable to being bought up and redeveloped as high-end housing.
3. Make affordable housing more affordable for builders, borrowers and users through targeted incentives
Government can’t, and shouldn’t, pay the costs of building all the units that need to be constructed. But it can provide a jolt of targeted incentives that make it easier for builders to build, developers to develop, lenders to lend, renters to rent and potential owners to own.
Which ones would be easiest to get off the ground? Well, how about ones supported by almost everyone?
Here’s a short list of affordable housing incentive programs that, according to the Bipartisan Policy Center, are supported by more than 50% of Democrats, more than 50% of Independents and more than 50% of Republicans:
· Converting mortgage interest deduction to a tax credit for low and middle income homebuyers
· Downpayment assistance for first time homebuyers
· Incentives for landlords to accept housing vouchers from low-income families
· Funding to help public agencies better enforce fair housing laws
· New vouchers for low-income families with young children to pay for apartments in neighborhoods with good schools
· State tax credits for developers building affordable apartment buildings
· New tax credits for developers to renovate homes available in distressed neighborhoods
· Programs to connect homeless veterans to affordable housing
· Programs to protect low-income renters facing financial hardships
What happens next?
There is so much potential in the US to do something meaningful about our affordable housing. In the end, the challenge is that despite widespread bipartisan support, we aren’t served up a regular supply of affordable housing outrage in our social media algorithms. We are for more affordable housing, but it is almost no one’s TOP priority. For a while, at least, we need to find ways to discover small victories, amplify them and help them become contagious.
Here's one that I heard about during my work on this series (and will write more about later). Over the past four years, a group in Charlotte NC called the Affordable Housing Fund has raised $215 million to buy up and rehab existing rental properties in the city, to be rented to families making 80% or less of the area’s median household income. By the end of 2024 the group’s apartments will house more than 5500 residents in locations with existing easy access to food, schools, services and transportation. The idea is to buy up and fix up housing that would likely soon be torn down, rebuilt and priced out of the affordable housing market, with a guarantee that the units will remain affordable for at least another 20 years. Mark Ethridge, president of Ascent Housing, which is buying and managing the purchases, told WFAE when the project began that “these are neighborhoods that I think anybody could identify that are near major public and private investments, that are in mixed-income neighborhoods, that you know that affordability is eroding.”
Affordable rental units for 5500 people in Charlotte is a drop in the national bucket of need. It doesn’t even meet the full need in the Charlotte region. But it’s a great start, and one that other cities are starting to copy. Who’s next?
-Leslie
Notes:
America short 3.2 million homes: https://www.axios.com/2023/12/16/housing-market-why-homes-expensive-chart-inventory
America short 7.3 affordable rental units for extremely low-income households: https://nlihc.org/gap
Decline in affordability over time: https://fred.stlouisfed.org/series/FIXHAI
NC lack of affordable units: https://nlihc.org/gap/state/nc
Building for first-time homeowners may increase: https://www.axios.com/2023/04/27/mortgage-rates-first-time-homebuyers
Age of all construction workers: https://www.nahb.org/blog/2023/06/age-of-construction-workforce#:~:text=According%20to%20NAHB%20analysis%20of,of%20construction%20workers%20is%2042.
Aging in the skilled trades: https://www.peopleready.com/skilled-trades-labor-scarcity-workforce-aging-as-fewer-recruits-enter-trades/
Construction worker gap: https://www.constructiondive.com/news/round-table-do-people-not-want-to-work-construction-anymore/636271/
Demographics of construction industry: https://www.ceacisp.org/news/construction-worker-demographics-us#:~:text=The%20most%20common%20ethnicity%20of,94%25%20of%20what%20men%20earned.
Bezos, Goldman Sachs and others buy up homes, convert to rental housing: https://finance.yahoo.com/news/bezos-backed-company-surpasses-100m-175917368.html?guccounter=1&guce_referrer=aHR0cHM6Ly93cmFsdGVjaHdpcmUuY29tLw&guce_referrer_sig=AQAAAEp1ofYA8_ZPSRy4HAlUSPlLZA-2uk_U10PJD-oqFT2_Nh-m9AuCE2K6twizEqRuum7v6GbPFUryCMvSFWfybzucFcCg9ekx__N7iXF2tXHq6Zi6XZ3odQmZb0BVPT9u0FXRRzCuFld1zIZi_M4lDFmecA-rKauUt5fg7Q_FPuDL
Polling on incentives to spur more affordable housing: https://bipartisanpolicy.org/blog/bpc-morning-consult-poll-housing-issues/
Rental rehab in Charlotte: https://www.wfae.org/local-news/2020-11-03/new-private-fund-to-help-preserve-existing-affordable-apartments