Affordable Housing Mostly Takes the Pandemic in Stride

While COVID-19 continues to negatively impact many corners of commercial real estate, affordable housing appears largely untouched by the pandemic, according to a new report. 

In the second quarter of this year, the affordable housing sector’s national vacancy rate fell by 10 basis points to 2.4%, according to a new report from Moody’s Analytics’ REIS subsidiary. Further, the sector experienced inventory growth of 0.5%.

The completions figure of approximately 5,700 units was lower than the quarterly average of nearly 7,900 units over the past year—this was the lowest since the third quarter of 2016, according to the report, which was authored by economist Mary Le.

“It is essential to note that an affordable housing shortage has been a major issue that predates the pandemic, thus the constant supply and demand imbalance for this sector reinforces the critical need for affordable housing across the country,” Le wrote. “Accordingly, this sector appears mostly unaffected by COVID-19.”

The findings are in keeping with a duo of reports released earlier in the pandemic, which pointed up affordable housing’s history of riding out recessions largely unscathed. 

In its survey of more than 1000,000 individual properties, Novogradac found that the national occupancy rates for two-bedroom LIHTC properties for residents at or below 60% of the area median income never slipped under 95% from 2009 to 2019. Further, there was a gradual increase throughout the decade, according to the national accounting and consulting firm. 

Novogradac’s data is echoed by the national nonprofit affordable housing organization Enterprise’s historical data, which also shows an increase in median total revenue per unit for every year starting in 2005.

But affordable housing rent collections do appear problematic. In August, they came in at 77% of 2019 collections, and 76% of collections in July 2019, according to proptech firm MRI Software. And rent collections overall are declining, the National Multifamily Housing Council’s latest Rent Payment Tracker’s reported.

Even the REIS report did note a few trouble spots. “Some metros have been more severely affected than others. Odessa-Midland and Fort Myers saw the largest decreases in rent at -3.2% and -1.9%, along with San Francisco and Fairfield County both at -1.2%.” 

But overall, Le asserted, “Affordable housing is arguably the strongest and most consistent of all the property types, with demand regularly outpacing supply, this sector will remain robust. It is expected to hold stable during the pandemic and improve fairly quickly as we recover.”