The affordable housing crisis has been an ongoing situation, and the events of the past year have only exacerbated the need. As we move into Q3 of 2021, transition to post-pandemic, it is critical to understand the various factors that are driving and/or influencing the increased call for investment and creativity in the affordable housing market.
The Affordable Housing Crisis
According to Pew Research Council, the gaps between high income, middle income, and low income families have grown significantly in the past several decades. Housing features strongly among the factors contributing and exacerbating this evolution. Studies funded by Habitat for Humanity show that by 2019, among households in the United States, 37.2% of households faced a housing cost burden (spending 30% or more on housing) and 1 in 7 experienced a severe housing cost burden (spending 50% or more of their income). The median income for lower income households also rose slower than the median sale prices for homes and rental rates, exacerbating the cost burden. These persistent changes have increased the need and demand for affordable housing.
In some ways, it has been a simple question of supply and demand. With the increase of income inequality, millions of Americans have been priced out of the housing market. At the same time, land prices and construction costs are continually escalating. This, coupled with increasingly burdensome regulations impacting both the budget and time to deliver new housing, has created our current dilemma of there being insufficient product to meet the current need.
A Growing Problem
The pandemic has been a travesty worldwide, severely impacting economies, families, and our general social fabric, but most especially the most vulnerable elements. The affordable housing sector has been hard hit on two fronts. The cost to end the crisis is a severe financial burden on state and local governments, decimating budgets that would otherwise go towards funding affordable housing. In addition, lower-income households have tended to work in industries hardest hit by the pandemic (i.e. small retail and food services industries) – where employers have been forced to close and lay off employees or remain open and risk potential infection or other repercussions. This has placed “essential” workers at risk with less than adequate protocols for safety, which results in a high infection rate and job absence or loss as well. In other words, less money is available to support the very people who are most vulnerable to the personal ravages of the disease. While various government entities have instituted rent moratoria, the underlying housing insecurity has increased.
Developments in 2021
The factors that exacerbated the affordable housing crisis in 2020 will encounter additional issues in 2021, leading to a potential spike in the problem. Unemployment has continued to rise as businesses fail over the prolonged shutdown. While we have seen innovation and incredible efforts by many businesses, the restrictions on access, competition from increased online retail, and steady decline in consumers due to illness and their own fiscal crisis will feed into the cycle of lay-offs, which will impact the housing market. The time limits on the various rent relief efforts will be reached in 2021, and there is no certainty of a sufficient additional extension of assistance to residents in the face of landlord demands. The pandemic has made it clear that the safety nets in place in the housing market are fragile, and many people are one paycheck away from losing their homes. In addition, affordable housing construction costs and timelines will increase due to labor and material bottlenecks and COVID-induced loss of productivity. Finally, the fiscal crisis faced by state and local governments is continuing to spiral upwards as the costs associated with the pandemic increase, and revenues decrease.
Innovation, Creativity & Working Together
Several steps can be taken to address the looming issues. First, government officials need to hold fast to commitments in their budgets to affordable housing. Second, they need to take a careful look at the regulations and red tape that increase the cost of construction and delay the progress of construction. Third, creativity and partnerships with the private sector need to solve the problem that the norm for affordable housing construction is costly, lengthy and complicated, which makes it difficult to deliver the urgently needed housing. Coming up with new ways in financing, entitlement and construction will be needed to drive forward housing construction.
At NDC, we are committed to working in partnership with communities, the government and the private sector by coming up with innovations that allow us to continue to deliver affordable housing as the need continues to grow. We have multiple projects completed and in development throughout the DC Metropolitan area. Some of our projects include: 1100 Eastern, Park 27, High Street, and 3450 Eads in DC. Collectively, these developments will provide hundreds of low- and moderate-income housing units to the area. Our innovations are based on increased efficiencies, stakeholder unification and several decades of experience in the space. Mindful of the crisis, we see ourselves focusing on continued efforts to deliver relief to the people most impacted.