Affordable Housing vs. Housing Affordability

What changes need to be made to ensure everyone has access to, quality housing at a price they can afford

In recent years, population growth in urban areas has far exceeded multifamily housing development, leading to rising rents and a shortage of affordable housing. Because of this, affordable housing has been a hot topic among citizens and politicians alike, but there is a lot of confusion in this area as to what constitutes affordable housing as opposed to housing affordability.

To help provide clarity on the issue, Entrata recently invited Ethan D. Handelman, Deputy Assistant Secretary for Multifamily Housing Programs at HUD to speak on the issue at one of our Resident Expert forums.

Handelman has a wealth of experience in the multifamily industry both in his current role and as a consultant. His main responsibilities at HUD include overseeing multifamily mortgage insurance, which also includes both affordable and conventional housing. Along with the asset management and portfolio oversight division which oversees the loans it insures as well as the rental assistance programs that benefit approximately 1.3 million households.

Beyond that, he oversees the recapitalization of public housing into section 8 properties. This helps ensure that affordable housing isn’t lost despite transfer from government to private ownership.

In our conversation, Handelman noted that the lines between affordable housing and housing affordability have blurred in recent years as the cost of rent has increased, but he explained it like this, “When we say affordable housing in terms of HUD, it’s housing that has capital or operating assistance attached to it to make it more affordable. As such, it has rules attached to it to make sure that it serves the people it is intended to serve.”

Affordable housing blockers

But there are still large segments of the population who don’t qualify for affordable housing, so what can property owners do to find the balance between maximizing profits and providing this much needed service?Currently, there are several blockers that are inhibiting developers, most notably the large capital expenditures it takes to create new multifamily housing, and that’s in addition to the costs it takes to maintain and keep current housing in good condition.

So you run into this catch-22—do you build new properties and allow existing ones to fall into disrepair or do you maintain current properties at the expense of creating additional inventory? There is no right or wrong answer and that’s why developers and government agencies are in such a hard position.

Another perceived blocker that when you dig beyond the surface doesn’t actually exist is the misconception that people don’t want apartments in their neighborhood. On the contrary, this is something that most people are comfortable with because they understand where we’re at in our current housing crisis and they want to provide opportunities for people to live where they work or go to school. This situation is mutually beneficial because it not only provides those individuals a place to live, but also improves the community as a whole because when people live close to where they work it means less traffic, less emissions, a lower carbon footprint, which at the end of the day benefits everyone.

But the biggest blocker standing in the way of more affordable and multifamily housing is government zoning regulations.

“In vast swaths of this country, pretty much anywhere that is marked as residential for development, the only thing that land use policy allows you to build are single family homes on pretty large lots,” stated Handelman. “That's exclusionary zoning. It is one of the biggest limits to the market, to provide the housing that is needed in particular places.”

Some metro areas, including Minneapolis-St. Paul, for example, have eliminated exclusionary zoning laws, making it possible to build duplexes or triplexes on any residential plot. While it’s still early, results have been somewhat encouraging.

Zoning changes are a good first step, but aren’t a catchall to solve the affordable housing crisis. Another area where governmental regulations can help close the affordability gap is through subsidies and other programs, whether that be subsidies to those in need of housing to make up differences in rent or to developers to help cover the capital expenditures to build and operate new multifamily properties.

Top needs for affordable housing beyond just inventory

Typically as employment opportunities increase in a given area, the demand for housing also increases in that same area. As mentioned previously, it benefits the community greatly if people are able to live and work in the same area, not only for the wellbeing of the environment, but also for the mental wellbeing of those same individuals.

However, the problem often arises in these situations that people working in some of the most important jobs that have the greatest impact on the community like healthcare, law enforcement, food service, and education are priced out of living where they work. Communities should strive for economic diversity to increase the vitality and quality of life for everyone living there.

Unfortunately, there is no silver bullet to solve this problem, but below are some jumping off points to start with, including:

  • Creating more opportunities for both developers and residents
  • Eliminating existing barriers
  • Providing more subsidies as needed

“There’s a misconception out there that housing assistance is an entitlement, like social security,” concluded Handelman. “It’s not. Only about a quarter of people who are eligible for housing help actually get it because the resources are too limited. We should be meeting all of that need.”

Learn more

To access the entire Resident Expert session with Ethan Handelman and Entrata’s Virginia Love, click here.

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