What Can Be Done About the Lack of Affordable Housing?
Robert Dowling is the retired Executive Director of Community Home Trust in Chapel Hill.
The lack of affordable housing options in North Carolina has been a problem for many years. In years past, however, it was primarily a problem for low-income families. No longer. Since the pandemic, it has been increasingly difficult for ‘average’ families to afford a place to live. This is true for those seeking rental housing and ownership opportunities.
The News & Observer reports that Triangle home prices increased by 18% from June 2021 to June 2022. According to Zillow.com, rents in the Triangle rose 14% in the same period. Residents in other parts of our state have seen the cost of housing similarly rise while their salaries have failed to keep pace.
As a result, it is more difficult for young families to buy their first home and for renters, particularly older adults, to find affordable apartments. Buyers also face the tougher burden of higher mortgage rates.
What can be done to provide more affordable housing options? Although a greater supply of homes and apartments would help, an expanded supply would most likely be insufficient to impact market rents or prices. According to Fannie Mae, in 2019 there was a shortage of 3.8 million homes nationwide. Filling that gap would take decades even if many of the newly developed homes were affordable to those making less than the median income.
The higher land prices and construction costs of most homes built today render them unaffordable for families earning the median income. As a result, those families are forced to pay a greater portion of their income for housing.
The private for-profit sector develops most of the housing in NC and the country; however, the ability of these private developers to produce many more homes is constrained by local housing ordinances, which highly regulate housing development, and by the industry’s need to earn a return on capital.
Developing homes is a capital-intensive business. That capital comes in the form of investor equity and bank loans. If developers cannot provide reliable profit projections to investors and lenders, they will not obtain the capital needed to develop a property.
If developers don’t develop properties, our housing shortage will only be exacerbated. But if they obtain the capital to develop housing, those homes will most likely be unaffordable. How do we resolve this dilemma? Creating a greater supply of affordable homes in the next decade will require greater involvement of federal, state, and local governments. By providing loans or equity to developers in return for a percentage of affordable homes can make builders less dependent on private sources of capital. At the same time, more of the homes developed will be affordable to “average” people who desperately need more affordable housing.
This type of public-private partnership is already working in places like Montgomery County, MD. It can work elsewhere too, but it requires that both state governments and the federal government allocate resources sufficient to solve the housing shortage. It also requires local governments to increase housing density, which may run counter to the wishes of local citizens.
Postscript
by Diana McDuffee
Affordable Housing Initiatives are usually proposed at the local level by Democrats or progressive candidates who are most likely to support these initiatives. One race in Concord, NC has placed support for a housing initiative (WeBuildConcord) on the ballot. Clearly, achieving this goal requires voting for candidates who back the initiative. In Cabarrus County 26% of households are cost-burdened by their mortgage (30% or more spent on housing), and 44% of renters have difficulty affording their homes. Turning out in the upcoming municipal elections in Concord to back candidates who favor this initiative could ease the housing problems in Concord.
For the Chapel Hill affordable housing plan go to: https://www.chapelhillaffordablehousing.org/read-our-plan