Let the Marketplace Work

Read this headline. Think about what it’s saying. It puts the words “affordable” (i.e., inexpensive and plentiful) in the same sentence with “lottery” (i.e., scarce).

Remember when 72-inch flat-screen TVs were a $10,000 luxury? Now we can select from scores of competing brands for a small fraction of that cost.

How did this happen? Was it the result of a lottery? Government regulation? Limits on new flat-screen TV production and ownership?

No. It was the result of competition.

Let the marketplace work. Deregulate the production of housing and let developers like me reach renters and buyers previously unreached.

From the piece:

“The affordable housing lottery has launched for 200 Montague Street, a 20-story residential building in Brooklyn Heights, Brooklyn. Designed by Beyer Blinder Belle and developed by Aurora Capital Partners, the structure yields 121 residences. Available on NYC Housing Connect are 38 units for residents at 80 to 130 percent of the area median income (AMI), ranging in eligible income from $54,960 to $215,1500.”

The Perfect Storm

Rising construction & operating costs – along with rising interest rates – were partially offset by significant rent increases for market rate properties in 2022. Many of these deals were salvaged by increased market rents last year.

Not so for affordable multifamily.

Costs and interest rates rose for affordable multifamily, too. But rents – which are tied to household income – increased only modestly in 2022. Because of this, many of these restricted rent deals don’t pencil out.

From the piece:

“The 2023 housing market’s ‘headwinds’ are the same for all homebuilders — high construction costs compounded with high interest rates that have lowered borrowing amounts. But those challenges are especially sharp for affordable housing developers.”

A link to the news piece is found here.

Strength of Affordable & Workforce Housing Investments

“It’s critical for investors to understand that affordable housing is a strong and stable investment, one that’s resilient even when the economy isn’t. We have seen gains in the real estate market slowing, yet the affordable housing market remains strong.”

Link to article found here.

Modular Construction in Affordable & Workforce Housing

“Building homes off-site can help speed up the time it takes to complete homes in areas of the country that face extreme weather, Lawrence said, as the initial construction process takes place inside and away from the elements. It’s also more efficient in the sense that workers build the homes in an assembly line approach versus starting from scratch at each job site. Economies of scale not only reduce material costs, but they can also reduce waste generated during construction, Lawrence added. “

Link to article found here.

Durability of Affordable & Workforce Housing Investments

“Affordable housing has shown itself to be a strong hedge against a recession. While higher-end, higher-rent communities are more likely to be plagued with higher vacancies when residents tighten their belts, affordable housing always remains in demand — if anything, demand is even higher in a downturn.”

Link to article found here.

Not In My City

“You can work here, but don’t think about living here.”

This is the mantra of affluent cities relying on less affluent cities to provide for their affordable housing needs.

From the piece:

“Manteca is Brentwood’s affordable housing plan…. All of the solutions being discussed were essentially aimed at solving the affordable housing of Bay Area cities and not that of Manteca.”

https://www.mantecabulletin.com/opinion/local-columns/manteca-needs-affordable-housing-manteca-and-not-brentwood/

New REIT Will Focus on Affordable Housing

“Avanath Capital Management and MacFarlane Partners, two of the largest African American-owned real estate companies in the US, have jointly filed paperwork with the SEC to create a new REIT. It is reportedly the first REIT to focus on Opportunity Zones, though it will look to other properties as well.

The company will ‘invest in, develop, redevelop and manage mostly affordable and workforce multifamily properties in Opportunity zones, in dynamic, US metropolitan areas,’ the filing said.”

https://www.globest.com/2020/10/08/new-reit-will-focus-on-affordable-housing/?slreturn=20200915235945

The Paces Foundation and Soho Housing Partners Announce Strategic Partnership

“The Paces Foundation and Soho Housing Partners are pleased to announce they have entered into a strategic partnership, combining Paces’ industry leading affordable housing development and preservation services with Soho’s exceptional capabilities structuring complex financial solutions that make quality investments for workforce housing communities possible.”

https://www.prnewswire.com/news-releases/the-paces-foundation-and-soho-housing-partners-announce-strategic-partnership-301151832.html

Freddie Mac: New Research Shows Affordable Housing Shortage Persists

“Less than 10% of rental units are affordable to renter households earning 50% of median renter income (MRI), according to new research released today by Freddie Mac (OTCQB: FMCC) Multifamily. Building on last year’s ‘Diminishing Affordability – Inescapable’ report, the new study isolates renter income to more accurately capture the availability of affordable housing to individual renters.”

https://www.globenewswire.com/news-release/2020/08/26/2084311/0/en/Freddie-Mac-New-Research-Shows-Affordable-Housing-Shortage-Persists.html