New Developments: A crisis demands creativity
By Thom Amdur
4 min read
We cannot deny we have a national housing crisis. A new study commissioned by the National Multifamily Housing Council recently found that the U.S. must add 325,000 new apartments annually to meet rising demand, while the average production over the past four years has only been 244,000 units per year. Housing supply is not keeping pace with demand, wage growth is tepid at best and not keeping pace with rising rents and home-prices, and political uncertainty exacerbates the situation. The challenge we face is multifaceted and is going to require a multipronged solution.
One quarter of all Americans are housing cost-burdened and the strain is most difficult for individuals and families at the lower end of the income spectrum. There is not a single county in America where a family of four earning minimum wage can afford local market rents.
More people are now competing for limited supply of available rental housing, some by choice, others by necessity. Since the credit crisis began in 2009, former homeowners with bad credit have been forced to enter the rental market. Many demographers believe that the current rental housing demand is significantly under-reported. Consider all the yet-to-be-formed Millennial households, the 20- and 30-somethings still in school, living back at home with parents or with roommates, who will eventually enter the housing market.
This crisis does not seem to be a high priority in Washington, DC. While Treasury Secretary Steve Mnuchin and HUD Secretary Ben Carson have both expressed their support for the LIHTC, the administration’s tax reform plan – a single-page statement that many have characterized as more of a wish list than a plan – makes no mention of the program and primarily emphasizes a significant reduction in the corporate tax rate. Assuming Congress and the administration successfully reduce corporate tax rates, we will need significant legislative enhancements for the LIHTC and Historic Tax Credit just to maintain our current rate of production.
Senators Cantwell (D-WA) and Hatch’s (R-UT) Affordable Housing Credit Improvement Act of 2017 takes an important step towards expanding LIHTC allocations by 50 percent and fixing the four percent LIHTC for tax-exempt bond transactions, which would go a long way towards increasing affordable housing production and stabilizing the LIHTC equity market. Likewise, the Historic Tax Credit Improvement Act, co-sponsored by Reps Mike Kelly (R-PA) and Earl Blumenauer (D-OR), would make critical enhancements to the Historic Credit. If we are truly committed to addressing this crisis, we need both bills to be included in tax legislation this year.
But I don’t think this is enough. To even attempt to meet current and future housing needs we will need additional models, strategies and tools. Over the past few months, I have been reviewing some of the other creative approaches academics and practitioners have been floating to help drive down costs to make our housing dollars go further.
On one end of the spectrum, last fall the American Enterprise Institute, a conservative DC think-tank, released its “Economical Rental Housing for Communities That Work.” This market-driven plan is premised on local governments creating more cost-effective development environments through zoning enhancements, reduced fees and parking requirements, expedited processes and a “good enough” approval standard coupled with “economical design” choices.
Some other ideas to consider include:
- Expanded adoption of as-of-right zoning regulations that facilitate more affordable and workforce housing;
- More concerted efforts to prioritize surplus and quasi-government land for affordable housing;
- A more flexible Davis-Bacon wage scale for affordable housing;
- Incentives to encourage more privately funded employer-assisted housing;
- Housing finance agencies and developers must also collaborate to develop more effective cost-containment policies in QAPs that more effectively balance social priorities with production goals;
- And (my personal favorite from a recent David “Guru” Smith talk I attended last month) an urban homesteading concept, perhaps tied to college debt forgiveness (particularly appealing to me as a father of three small children).
Our industry’s attention may be focused currently on maintaining and expanding our critical housing and preservation resources in the Congress and rightly so. But I encourage our readers to think beyond the immediate legislative concerns.
Confronting this crisis requires more creative thinking.
