Last week, I shared a discouraging trend of rising rents, low vacancy rates, and financially strained renters released in the Harvard Joint Center for Housing Studies (JCHS) America’s Rental Housing 2020 report.
The good news is that the report itself, and the presentation and panel discussion at the January 31 release of the report in Minneapolis, highlighted some ideas of what the government and private and public sectors can all do together.
“We need significant buy-in from all levels of government across the country, as well as concerted efforts from the public and private sectors,” said Whitney Airgood-Obrycki, a research associate with the Harvard JCHS at the conclusion of her presentation of the study results.
She said there are some communities with strategies that are working, including a wave of inclusionary zoning; zoning reform; incentivizing the building of rentals with a streamlined building permit process; funding affordable housing projects through bonds and other sources; and creating local rental assistance programs to fill the gap at the federal level. The outlook summary in the report describes how all these groups can contribute to solving the affordable rental crisis: “Local governments have found themselves on the front lines of the rental affordability crisis. In response, many jurisdictions have adopted a variety of promising strategies to expand the affordable supply, including increased funding and reform of zoning and land use regulations to allow higher-density construction. Organizations ranging from hospitals and universities to tech companies have also started to address the crisis.”
However, the outlook summary concludes: “Ultimately, though, only the federal government has the scope and resources to provide housing assistance at a scale appropriate to need.”
“There are two kinds of affordable housing, just so we’re clear,” said Deidre Schmidt, President and CEO of CommonBond Properties.
“There is federally subsidized and regulated affordable housing,” she said, describing how, in Minnesota, government officials have prioritized preserving the affordability of older federally subsidized rental properties that come out of the regulatory required service period. They could shift to market-rate rentals if not for the support and intervention of organizations and agencies, she said.
“The other part of affordable housing is delivered through the private sector, for-profit, housing developer and owner segment,” Schmidt said. “That’s actually the vast majority of affordable housing that’s delivered to our market.”
“And there’s this term that’s been coined, which I hate, but I use because everyone uses it, called ‘naturally occurring affordable housing,'” Schmidt said. “It happens because of the age, location, amenity level . . . and in some cases, owner choice and decision over time. As properties age, they drop generally to more affordable categories. We can’t take that housing stock for granted.”
Tony Barranco, Senior Vice President of Real Estate Development of Ryan Companies in the Twin Cities, is a private sector developer. He responded to the growing need of more rental housing. “We need more supply,” he said. “We need it from the public sector and from the private sector, and there are ways we can get there. The Class A housing we build today is Class B in 15 years, and class C in 30 years.”
But it’s not that simple, according to Schmidt. She said that in the Minneapolis area, “over a third of that stock has transferred ownership in the past 15 years.”
“Every time that transfer occurs, it comes with a rent increase–and potential dramatic displacement for folks who get discharged into a market that doesn’t serve them well and might even discriminate actively against them,” she said. “I think it’s important that we get owners in place who, because of their mission or orientation, want to keep that affordability in place. We also need help from the public sector in order to have public housing that is a good place to live.”
Chris Herbert, managing director of the Harvard JCHS, said, “We need to get more housing into the public sector today.”
Jennifer Leimaile Ho, Minnesota Housing Commissioner, connected the dots between the government, private, and public sector players in another way: “I really believe that the role of government is to create incentives for the private market to create housing that gets down to the folks who are making the least,” she said. “That’s our role. That’s our job. Because the private market will do what it does and where it’s the most profitable.”
Herbert said there is political pressure now from middle-income renters. “Part of the solution has to be how do we expand the private sector to produce housing for the broad middle,” he said. “But what we can’t do then is forget about the other politics: How do we get more money for the poorest among us? That’s a harder political conversation because there’s less of a constituency for it, but it’s critical to what we’ve been talking about.”
“The pain being felt more uniformly is actually an opportunity for us,” said Schmidt. “Now that more people with affluence and influence have a direct connection with the housing crisis, the crisis that has been there forever now has a bigger constituency. Who are we allowing to determine what is permitted to be built?” She said that everyone has an opportunity to influence those decisions in the government, private, and public sectors.
Leimaile Ho also called out to private sector players who aren’t housing developers. “If you’re an employer, you’ve got to think about the employee who makes the least, think about who the healthcare workers are who are taking care of your parents, you’ve got to think about who the teachers are, and we’ve got to be building for that,” she said.
Responding to a question about what the federal government could do differently to address the rental housing crisis, panelists gave a variety of answers.
Leimaile Ho said existing programs like Low Income Housing Tax Credits could be re-evaluated to be more effective. “The average American doesn’t think about Low Income Housing Tax Credits. Usually we don’t want to criticize housing programs that are out there because we don’t want them to go away. But we should take a minute and re-conceptualize.”
“We need more funding on a federal level,” said Barranco. “On a local level, we have many investors. But if we fixed property taxes, it would allow investors to have better return.”
Schmidt focused on rental assistance. “I advocate for increased rental subsidies,” she said. “There are still going to be people who cannot afford rentals in the market.”
Leimaile Ho agreed. “We need to set the price of those subsidies to keep up with the market.”
Herbert advised looking at transportation policy related to housing policy.
“It costs so much not to fix this,” Leimaile Ho said. “It costs us in our schools. It costs us in our healthcare. It’s costing our competitive advantage in being able to bring new employees in. We have to think about it as an investment. In Minnesota, we think of it like an infrastructure: housing infrastructure bonds. We can’t afford not to do this.”