Put Affordable Ideas Before Legislators

PALM SPRINGS, CA—Presenting creative solutions to policymakers is key to helping solve the lack of affordable-housing problem nationwide, said panelists at NMHC's Apartment Strategies Outlook Conference here earlier this week. The need for solutions to this problem is growing stronger as the economy improves and our workforce continues to grow.

Daryl Carter, CEO of Avanath Capital Management and moderator of the “Housing Our Workforce: What's Next?” panel, said the median renter in the US makes $36,000 per year, making affordable housing a number-one priority. “We must come up with solutions and strategies.”

Hugh Frater, chairman of Berkadia, added that incomes have been stagnating for decades, but rents are going up, which is unsustainable. “The economy has made a transformation to lower-paying service jobs. More of us are paying more money for rent. We need to get in front of this issue.” He added that there are positive outcomes to increased workforce housing, including better health and well-being for the public. “The problem exists everywhere, but more burdened renters are in high-barrier markets.”

Carter asked rhetorically, “What's the benefit to affordable housing? Our portfolio is about 98% occupied, and we operate at maximum rents. We're delivering double-digit returns to our investors.”

Cindy Clare, president of Kettler Management, pointed out there is no crossover or interaction among the various tax-credit agencies, which makes for duplication and inconsistency among paperwork needed for affordable-housing development. There is often layering of tax credits in order to get the most benefits out of the system.

Carter appealed to conference attendees: “If you've got ideas of fixes, send them to us. We can present ideas to the policymakers.”

Building affordable housing that pencils is an issue, said Larry Curtis, managing partner of WinnCompanies. “There is a significant occupancy percentage that we can't serve because the cost to build can't be supported by rents. Creating workforce housing requires subsidy. We need to create mixed communities of market-rate and affordable housing, but the cost needs to be written down to create workforce housing. Looking at the existing programs, some—including LIHTC—are threatened. The industry needs to turn more market-rate into affordable.”

Carter added that his firm is looking at C-class assets to buy and renovate to serve those with the median income. The ideal price point for these is under $150,000 per unit.

Frater said we will see some positive programs come out of the need for affordable housing, including RAD from HUD, which can promote preservation. “Over 70% of affordable properties are less than nine units. The rehab of older stock is a positive thing, and it will come out of the agencies.”

Curtis noted that value-added rehab is causing rental rates to rise, which leaves out workforce housing. “More of us have the capabilities to do more affordable. If firms decided to do one or two affordables a year, it would make a dent. We need to delve into the gentrification stock to create and preserve affordable housing.”

Clare said often the question is to build or maintain the workforce housing stock. “In the suburbs, we need to maintain. People can't afford housing in the suburbs, so the workforce tends to live closer in to the city.”

Creating more affordable programs via agencies is crucial, the panelists say. Frater said that since 70% of federal subsidies go to the single-family industry, more is needed for the rental market. “There's a lot of good thinking out there—let's get it in front of the legislators.”

Curtis pointed out that it's not just the working poor who need affordable housing—it's the middle class. “We need to focus on the 61% to 100%—the working middle class. We need to create more programs for them.”

Carter concluded, “The biggest impediments to affordable are more often at the state and local level than at the federal level. There is openness, but a lot of issues happen at the local level.”