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Image courtesy of the City of Covington
In most cities throughout the U.S., affordable housing is an urgent and growing need. According to “The State of the Nation’s Housing 2023” report by the Joint Center for Housing Studies at Harvard University, 19 million homeowners in 2021 were cost-burdened, defined as spending more than 30 percent of their income on housing. When adding renters to the mix, that number jumped to 40.6 million people or more than 1 in every 3 Americans.
These numbers point to an American crisis, one that’s not exclusive to urban, rural, or suburban environments. Because of the far-reaching nature of this crisis and its downstream effects on employment, quality of life, and even childcare options, cities are ramping up their efforts to ensure affordable housing for their residents. Their solutions aim to strike at the heart of several root causes of the housing crisis to right past wrongs.
Understanding the importance of these solutions and the aspects of the housing issue cities tackle requires a look back at some of the reasons why affordable housing became such an issue in the first place.
As one would expect, the American housing crisis is rooted in an intricate mesh of actions, attitudes, and outcomes that have brought us to our current circumstances. According to Carl Gershenson, director of Princeton University’s Eviction Lab, which gathers data on eviction rates in cities throughout the country, several factors can be pointed to when examining how we got to this point. Gershenson first points to what he calls “simple arithmetic” as a primary issue. “If you go back to the year 2000, the median renter household income has increased by around 3 percent, while the median rent has increased by 18 percent.”
While this stat is important, it’s only the start of diagnosing the problem. “As a country, we were in a situation where there were low-rent markets that could serve as safety valves for coastal cities…
Over the years, people who had lived in established places like New York City or San Francisco saw more of their income going towards rent every year, and it was getting harder and harder for them (to afford to live in these areas). Many people were displaced, having to move further into the suburbs or move to different places altogether. But at least there was a place for them to go because we had Phoenix, we had Houston, we had North Carolina.”
Matthew Roland, Assistant Dean, Clinical Assistant Professor, and Master of the Real Estate Development Program at the University of Buffalo agrees that wages have not increased to accommodate increased rental prices. Another factor that contributes to the housing crisis is inflation.
“Part of the growth in rent is factored by increased inflation that’s caused by, you know, everything globally. COVID-19 didn’t help at all. Construction costs are up; interest rates are up,” Roland says. “So it costs more to do a new project.”
Gershenson went on to say that cities that were once deemed “affordable” alternatives to larger cities saw dramatic rent increases during and after the COVID-19 pandemic, neutralizing their ability to be viable living options for people. Further, Gershenson notes that many of these communities had moderate eviction rates before COVID-19 but did not have extensive tenant protections. Without those protections in place and in the face of increasing rents in both small and large communities, many people were left with few options.
Gershenson also notes that along with increasing rents in formerly “low-rent” cities and a lack of tenant protections, zoning laws that discouraged or prohibited multi-family structures in communities led to a lack of affordable housing compared to the demand, specifically housing located close to employment-rich areas or areas close to public transit in cities.
With these factors at the core of the affordable housing crisis, cities are developing groundbreaking initiatives and dramatically shifting policies to stem the tide.
Image courtesy of BHP Imaging
While many see affordable housing as a “big city” problem, rural communities also struggle with housing availability and affordability. Laramie, Wyoming, has a population of just over 31,000. The city is home to the University of Wyoming— the only four-year university in the state—making the town younger than many of its counterparts (median age is 26.1, according to the 2020 U.S. Census.)
“We have an incredibly young population and a highly educated population,” says Brian Harrington, Laramie’s mayor. “In my mind, the number one thing holding back our community from growth and, sort of, stability is housing.”
Harrington says prospective employers looking to expand or move their company to Laramie would think the community is great but needs more housing. The city is roughly 1,500 units short.
“At the base level, what we need is more units. The actions of the [City Council] have largely centered around how can we get more units quickly,” Harrington says.
The Laramie City Council took an “aggressive” approach to the housing crisis by reducing zoning requirements and shrinking lot sizes. Harrington says there is no single zone in Laramie anymore that can’t have some variety of multi-family development.
Despite easing zoning regulations, Laramie, like many other cities, has been dealing with investors and companies buying up family homes, which strains the local housing market and reduces the inventory.
“We are seeing cash offers from mysterious LLCs happening, buying up every single-family home they can get … we’re just seeing stuff turned into short-term or long-term traditional rentals,” Harrington says. “And that, obviously, is not good for your housing market or for neighborhood community building. It really brings some challenges there.”
Gershenson expressed that while changing zoning laws is important, they would primarily serve middle-class families with the means to live in affordable housing. For low-income citizens, a financial investment by communities is needed, according to Gershenson.
In 2020, Grand Rapids, Michigan, had a housing needs assessment completed. “It was updated in 2022. The assessment showed the current demand for new rental housing by 2027 is shy of 8,000 units,” says Jono Klooster, Grand Rapids’ Interim Economic Development Director.
In 2020, the original estimate was just over 5,000 units. “On the homeownership side, the need is over 6,000 new units by 2027. Two years before that, the identified need was about 3,500,” says Klooster.
In early October, the city of Grand Rapids received $6.1 million from the state under the “Revitalization and Placemaking 2.0 Program.” According to Klooster, the grant will support five projects throughout the city—three of which are rehabilitating vacant buildings, and the other two are new construction projects.
“The grant program is competitive,” Klooster says. The city of Grand Rapids has successfully submitted the grant as an intermediary between the state and project developers.
“We put out our own, sort of, pre-application or call for proposals, so to speak, to get project submissions, and then we take those projects and make sure that they will be competitive under the state’s requirements,” Klooster says. “But beyond that, we have focused our application, for both of these grants, on new housing production with a priority for affordable housing.”
Klooster says Grand Rapids defines households requiring affordable housing as those earning no more than 80 percent of the city’s median income, which was $55,385 in 2021, according to U.S. Census data. The grant will also allow the city to support 27 new homeownership opportunities using the community land trust model.
According to Klooster, the lack of affordable housing has been a top concern for the Grand Rapids Chamber of Commerce. Housing scarcity can affect employers and businesses by reducing the number of employees able to live in the city.
“In this environment, where everybody is struggling to attract talent, the inability to provide the opportunities for people who want to live here to actually come and live here impacts employers. If we can snap our fingers and have those housing units that we need, I think a lot of companies would struggle a lot less with finding the employees and the talent they need,” Klooster says.
Image courtesy of Sam Greenhill
Another issue facing cities, especially those with large downtown areas, is the growing number of office vacancies driven by the COVID-19 pandemic and emerging interest in remote work. According to data from JLL Research, North America’s office space vacancy rate stood at 21 percent. While the economic impact of high vacancy rates is dramatic, it does present an opportunity for cities many are capitalizing on.
In Boston, Massachusetts, which has a nearly 20 percent office vacancy rate, a pilot program has been established to convert some of these buildings into affordable apartments. The Downtown Office to Residential Conversion Pilot Program incentivizes developers and owners willing to convert their buildings from office to residential use. Through the program, developers will enter a “payment in lieu of taxes” agreement with the City of Boston and the Boston Planning & Development Agency (BPDA). The agreement will provide an average tax abatement of up to 75 percent of the fair market-assessed residential value for up to 29 years. Permitting may also be fast-tracked through this program. To ensure that this program impacts the need for affordable housing, the BPDA passed a new inclusionary development policy requiring that 20 percent of each development be deemed affordable (17 percent designated for people living at 60 percent of Boston’s median income level and 3 percent for people using Section 8 vouchers.)
While these conversions make sense logically – take property that businesses have a lesser interest in and apply them to a greater need, the process can be challenging. Offices are structured differently from residential housing, and the conversions can be considered cost-prohibited for some developers. This has been particularly challenging in Washington, D.C., where a similar program has seen two of 12 planned office-to-residential conversions come to fruition. Recently, Washington, D.C. Mayor Muriel Bowser proposed increasing the budget for their program from $6.8 to 41 million by 2028. The program will include 20-year tax abatements for participating developers.
Although cities can legislate to make housing more affordable in their local communities, various programs nationwide help fund affordable housing says Roland. There are three “main” solutions for affordable housing, one being public housing that is typically built or operated by a local housing authority.
“We also have Section 8, which is a voucher system. A landlord is not obligated to provide vouchers; they have to kind of opt into the program,” Roland says. “The voucher covers the difference between their rent in the apartment building and what a resident can pay as a percent of their income.”
The third option is the Low Income Housing Tax Credit Program, a national program distributed throughout states. It awards developers tax credits for building a certain percentage of low-income housing. However, this solution is more complicated, Roland says, because these projects have different funding sources coming. Just in New York state, where Roland works, a project typically takes two rounds—or years of applications—to be eligible and awarded.
Whether adjusting zoning laws to encourage multi-family home development, seeking state and federal funding, or converting office buildings, city leaders are working hard to solve the burgeoning housing crisis. While housing shortages deeply impact quality of life, they can also take their toll on placemaking and the local economy. And while there isn’t a catch-all solution, there are pockets of success. In Washington, one of the two office-to-residential conversion buildings will contain 383 residential units. Other planned conversions in the nation’s capital will provide up to 1,000 units. Small numbers, perhaps, but it’s everything to the families and individuals looking for a place to call home.
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