Housing Affordability Policy Seen as Crucial Real Estate Issue for Industry

Robert Byron, the chairman of Blue Vista Capital Partners, took an impromptu poll of real estate professionals gathered at Chicago’s McCormick Place convention center on Tuesday to see who works in affordable housing.

About half of a packed banquet room’s roughly 300 attendees raised their hands. When Byron asked how many were working toward changing affordable housing policy, only three or four hands remained up.

The reaction underscores the state of an issue called crucial for U.S. housing as Urban Land Institute, the public policy and research group, holds its fall meeting. Affordable housing has long challenged multifamily developers, who say it’s nearly impossible to build and be able to charge lower rents without government grants or incentives. The National Low Income Housing Coalition estimates a shortage of 7 million housing units for the nation’s 10.8 million extremely low-income families.

The coalition also found there isn’t a state or county where a minimum wage worker can afford a market-rate, two-bedroom apartment. And in 2019, 37.1 million U.S. households were “cost burdened,” meaning they spent at least 30% of their income on housing.

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“Affordable housing, to me, is the No. 1 challenge and issue for the real estate industry as a whole,” Todd Mansfield, chairman of commercial real estate investor and developer Crescent Communities, said during a panel discussion moderated by Byron. Laura Cole, senior vice president of LWR Communities, backed up that sentiment.

And Kyle Bolden, east region market segment leader at EY, the accounting firm formerly known as Ernst & Young, said “we’re getting to the point where it’s obvious that there’s the haves and the have-nots.”

Momentum has picked up recently in public policy changes that could help affordable housing, though. In September, the Biden administration announced plans to help create, preserve or sell to homeowners and nonprofits nearly 100,000 affordable housing units. As part of that plan, the White House recently raised Fannie Mae and Freddie Mac’s equity cap for the Low-Income Housing Tax Credit program, the largest federal initiative targeting the construction and rehabilitation of affordable rental housing.

Fannie Mae and Freddie Mac are now permitted to invest up to $1 billion per year, or $500 million each, in affordable housing development and preservation supported by the tax credits in the housing program.

Single-Family Alternative

Another tool available for affordable housing is single-family rental houses. The property type, which has taken the investment community by storm, offers the privacy and space of a full-size house, minus the down payment and mortgage, both of which serve as a barrier to middle- and low-income families building wealth through homeownership.

“It’s the perfect alternative for families who choose not to own a home, because they may not … have the financial capacity,” Mansfield said.

Even so, the Biden administration expressed concern that during the second quarter, one in six U.S. single-family houses were bought by investors, raising prices and making it more likely that Americans would have to rent rather than buy.

The single-family rental market is growing at a rapid clip. In a separate ULI panel Tuesday, executives discussed the ever-increasing pool of developers and investors.

“There’s so much capital trying to get into this space right now,” said Andrew Schaffler, managing director at Angelo Gordon.

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While the vast majority of single-family rentals are being built to fetch market-rate rents, some projects have affordability in mind. Ashley Casaday, senior director of investments at RangeWater Real Estate, said her firm is developing single-family rentals in Atlanta. The homes sit near the BeltLine — a 22-mile stretch of unused railroad tracks that was revitalized into a popular outdoor loop around the city’s neighborhoods.

Casaday said all real estate projects within a quarter mile of the BeltLine have to contain an affordable component, which was a challenge, considering that best practices are still being established.

She also noted that most affordable housing requirements come from cities, while most single-family rental projects are built in the suburbs, where such requirements don’t usually exist.

“We haven’t seen that request from more suburban submarkets,” Casaday said. “I think we might see more of it.”

In the meantime, though, the need to provide affordable housing is urgent, the panelists agreed. EY’s Bolden noted the “huge disparity” in Americans’ incomes as a reminder — something that many real estate professionals may sometimes turn a blind eye to, he said.

“Teachers need some place to live. Essential workers need some place to live,” Bolden said. “While we were all staying home in our nice homes with Wi-Fi, there’s a whole class of folks out there who have had a completely different experience. We’re in the middle of an affordable housing crisis.”

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