The Changing Face of Affordable Housing

America’s affordable housing shortage continues from coast to coast. 

Everest checks in with investors and developers to address the issue. 

By now, you’re likely aware of the affordable housing crisis. 

Across the country, people are stretching their bank accounts to the limit with the vast majority of their income going to rent and mortgage payments. That is—if they can even find available housing! Throw in inflation and a struggling economy, and you’ve got a recipe for disaster. 

Before you start sulking, though, remember that a good loan officer has plenty of strategies for lowering your monthly mortgage payment (reach out to your friends at Everest!). That takes care of the homeowners. But what about America’s renter population? 

Today, we’re calling on our amazing commercial investors to help fix the rental housing crisis. 

In particular, the multifamily market is undergoing some really fascinating changes that will not only increase the number of available units, but also open up some highly lucrative opportunities for investors willing to step up to the plate. 

Let’s take a look at the details! 

A place to call home vs. cost of living 

To start, it’s important to understand the true definition of the term. According to the federal government, housing is considered “affordable” when rent or mortgage, plus utility payments, equals no more than 30% of a household’s gross monthly income. 

Affordable housing is either created through public assistance (dedicated income-restricted units available through government programs) or naturally occurring (NOAH). The latter refers to residential rental properties that are unsubsidized but still relatively affordable. 

According to NOAH Impact Fund, NOAH properties usually classify as Class B or C and were likely built between 1940 and 1990. Their rents range between $550 and $1,200 a month, making them accessible to low- and moderate-income families. Today, NOAH rentals are the most common type of affordable housing found in the United States. 

Now, back to the issue at hand. 

The crisis in numbers

Here’s some interesting trivia for you. 

What do all 50 states have in common? 

According to the National Low Income Housing Coalition, there is not a single state in the U.S. with adequate supply of rental housing for extremely low-income households. 

While California, Washington, Texas, and Florida are among the most dire, states in the Northeast like New York, New Jersey, and Pennsylvania are also experiencing unprecedented demand. 

Take a look at the situation in numbers. 

America’s Housing Shortage

At a glance

• For families living at or below the poverty line, the U.S. has an estimated shortfall of 7.3 million available and affordable rental homes. 

• For every 100 extremely low-income renter households, only 33 rental homes exist. 

• In 12 of the 50 largest metropolitan areas, the shortage of affordable and available homes for low-income renters exceeds 100,000 units. 

• The state of New York is home to 970,882 extremely low-income renter households, with 73% of them currently experiencing a severe cost burden. 

Stats reported by NLIHC.org

Meeting the demand

Despite general market skepticism, affordable housing has been a bright spot for commercial investors in recent years. This is due in part to the extraordinarily high demand for units, but also because of some exciting new developments trending in the multifamily space. 

“The affordable market is embracing more cutting-edge, sustainable, aggressive goals than the market-rate is,” says Architect Matt Duggan. This is because “local authorities that offer low-income tax credits and other funding mandate or incentivize doing so, often through competitive requests for proposals.” 

Realtor.com also reports that “partnerships between developers, government agencies, and nonprofits are on the rise, and more municipalities require new market-rate buildings to include a percentage of affordable units.” 

These incentives are helping investors and developers solve local shortages in a way that’s faster, more convenient, and profitable than ever before. The affordable housing crisis has also inspired them to reimagine the multifamily space for maximum impact. 

As you plan your next contribution to the rental market, take these trends into consideration. How will you change the face of affordable housing? Talk to your Everest contact soon! 

5 Fascinating New Multifamily Trends

Streamlined approvals

For decades, the process of getting a project off the ground was enough to discourage even the most patient investors. Now that the housing crisis is so severe, many governments are helping to expedite the process with streamlined approvals and permits. Reach out to your local authorities to ask about available incentives. 

Beautiful buildings

The notion of ‘Section 8’ doesn’t conjure a pretty picture. But the face of today’s affordable housing is dramatically transforming, as developers realize they don’t have to sacrifice beauty to stay on budget. Not to mention, new buildings are much cleaner, energy efficient, and up to code compared to older Class B and C units, making them highly desirable. 

Affordable meets market-rate

Many investors are cashing in on tax breaks and other incentives by incorporating a certain number of affordable units in their projects. Thus, we’re seeing a unique blend of both market-rate and low-income housing rolled into one. This revolutionary approach has helped boost the number of available and affordable units while enhancing the beauty of neighborhoods.

Straightforward designs

Instead of wasting money on impractical design elements, today’s multifamily developers focus on maintaining quality standards while still saving money. “Maybe, instead of choosing from 10 window sizes, there are three to consider,” suggests architect Jessica Musick. “This simplifies the list of both construction techniques and materials and should lead to better execution.” 

Strategic locations

Forward-thinking investors know that “affordable” doesn’t only refer to rent and utilities. To help low-income renters in more ways than one, seek to develop your project in an area close to parking, public transportation, jobs, services, and other cost-saving conveniences. These will serve as built-in amenities that are free to you—but priceless to prospective tenants. 

Everest says: supply creates its own demand

Close the deal with confidence 

For all your multifamily lending needs, turn to Everest Equity—

home of the Northeast’s premier commercial loan originators