The lack of affordable housing and rising operational costs are major challenges in the multifamily industry, particularly for affordable housing providers. At Apartmentalize 2024, a panel discussion led by Chase Harrington, President of Entrata, addressed these issues, featuring insights from Caitlin Garrison of Catalyst Housing Group and Ricardo Alicea of Wendover Housing Partners.

Understanding Affordable and Workforce Housing

At the outset, it’s important to understand the difference between affordable housing and workforce housing. Affordable housing typically caters to residents earning below 60% of the area median income (AMI), while workforce housing serves those between 80% and 120% of AMI. Both segments face unique challenges, including regulatory hurdles and limited budgets.

Lack of Supply and Rising Costs

One of the biggest challenges facing those needing affordable housing is the lack of supply, with competition for government funding and local opposition hindering new development. Rising operational costs, particularly commercial insurance, further strain already tight budgets. It’s difficult for affordable housing providers to maintain affordability in the face of these increased expenses.

"Everything is going up," noted Alicea. “Everything that we buy is more expensive. Staffing is more expensive. In the affordable world, we cannot compete with the conventional side. We cannot pay the salaries. It's a very, very unique niche of individuals. You have to find the person that is more about the cost than the money that we are making, and that's a very small niche.”

Policy and Legislative Challenges

Navigating complex and often inconsistent government regulations adds another layer of complexity to affordable housing. Affordable housing providers need to have robust compliance structures in place along with legal expertise. This is in addition to taking the time to build relationships with lawmakers and housing agencies.

“If you want to get into that space, you need to prove [to lawmakers and housing agencies] that you belong in the club,” stated Alicea. “You need to prove that you have the experience, you need to prove that you have the background, that you will comply, that you are it for the long haul.”

Marketing and Resident Expectations

Marketing affordable and workforce housing presents unique challenges due to stigma and the need to balance affordability with resident expectations.

“Marketing in the middle income sector is tough,” related Garrison, who comes from a conventional housing background. “It's a lot different than your conventional standard asset, and there's a lot of reasons for that. First, there is of course a stigma that comes along with affordable housing. if we market our assets as affordable, having an affordable component, we drive them away because they feel like they don't want to be part of that.”

As a result, you need to find the balance between educating potential residents that there is an affordable component to your community, while not driving them away. You don’t want to waste your time vetting prospects that won’t meet income requirements.

Technology Solutions and Collaboration

Technology plays a crucial role in optimizing operations and managing costs. It’s important to find technology partners who can create customized solutions for the unique needs of middle-income housing. Both panelists highlighted the value of collaboration, with Garrison stating, "We really try to partner with vendors... who are willing to work with us to build new tools."

Looking Ahead: Centralization and Innovation

Centralizing operations and leveraging technology were identified as key strategies for improving efficiency and scalability. As with many multifamily businesses, Garrison noted Catalyst is still trying to figure out what centralization means to them. Currently, that means bringing as many tasks in house and creating a virtual ops team across all of their properties.

Recommendations for Success

For those considering entering the affordable housing market, the panelists offered the following advice:

• Partner with the right technology provider: Find a partner who understands the unique needs of affordable housing and is willing to develop customized solutions.
• Build relationships with policymakers: Understand local regulations and advocate for policies that support affordable housing development.
• Invest in staff training: Empower your team with the knowledge and skills needed to navigate the complexities of affordable housing management.
• Embrace innovation: Be open to new technologies and approaches that can improve efficiency and resident satisfaction.
• Be patient: Change takes time, and success in affordable housing requires persistence and a willingness to adapt.

By addressing these challenges head-on and embracing innovation, multifamily businesses can not only survive but thrive in the evolving landscape of affordable housing.

Learn more about Entrata’s Affordable solutions here.