Category: Affordable Housing

Rent increases, financial barriers to homeownership, and the growing role of institutional investors in single-family home markets were the focus of two hearings in the House this week. Committee Democrats blamed corporate landlords for exacerbating affordable housing problems as Republicans emphasized high inflation and excessive government spending as the root causes. (Axios, June 29 and GlobeSt, June 30)

Views from the House

• During the June 28 House Financial Services Subcommittee on Oversight & Investigation hearing, “Where Have All the Houses Gone? Private Equity, Single Family Rentals, and America’s Neighborhoods,” Chair Al Green (D-TX) stated policymakers are examining “… troubling issues regarding the mass predatory purchasing of single-family homes by private equity firms, including the adverse impact predatory purchasing has had on first-time home buyers, the working class, and people of color.” (July 28 House committee hearing memo)
• Subcommittee Ranking Member Tom Emmer (R-MN) countered that an 8.6% inflation rate is the cause of current affordable housing challenges—and Congress should focus instead on lowering the cost of living for Americans. (Hearing video, June 28)

• A June 29 full committee hearing entitled, “Boom and Bust: Inequality, Homeownership, and the Long-Term Impacts of the Hot Housing Market” included testimony from Sam Chandan (above)—Director of the Center for Real Estate Finance Research and Professor of Finance, NYU Stern School of Business—and a member of The Real Estate Roundtable’s Research Committee. (July 29 House committee hearing memo)
• Chandan cited Freddie Mac research published this month that shows, “Nationally, the institutional investor share of the market has risen since just prior to the pandemic, but still only accounts for approximately 2.5 percent of home sales. By way of comparison, individual investors and other non-institutional investors account for 24 percent of the market, nearly ten times the institutional share.” (Chandan’s testimony and hearing video, June 29)
• Chandan also noted that housing equity gaps and the shortfall of affordable housing can only be addressed with a long-term, multifaceted approach that includes reforming local building codes and zoning, improving the supply of construction materials, and investments in public transportation that open new land development opportunities.

Responses

• David Howard, executive director of the National Rental Home Council, submitted a statement for the hearing record that included: “As a multitude of data consistently shows, the answer to the question posed in the title of this week’s hearing, ‘Where Have All the Houses Gone?’ is they were never built. Simply stated, the supply of housing in the United States has not kept pace with demand.”
• Roundtable President and CEO Jeffrey DeBoer, above, stated, “Expanding the supply and availability of affordable housing deserves a coordinated local, state, and national policy action plan. Local zoning restrictions, permitting issues, and the oversized influence of NIMBYs—coupled with high and now significantly rising labor and material costs—are the true factors limiting housing supply, and in turn, increasing housing costs.”

The Roundtable’s 2022 Annual Report states, “The affordable housing shortage is one of the most important and complex political problems in America, and The Roundtable continues to work with our national real estate organization partners to jointly advocate for policies that will help enhance the supply of safe, affordable housing.” (Housing section, 2022 Annual Report)

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Blackstone on Jan. 14 announced a $1 billion commitment to help address affordable housing challenges often faced by low-to-moderate-income families in historically under-represented communities. Blackstone’s single-family rental company Home Partners of America will expand their private sector program called Choice Lease, which offers qualified applicants below market rents and paths to homeownership without government subsidies. (Bloomberg, Jan. 14) 

An Affordable Housing Solution 

• Kathleen McCarthy, above, Global Co-Head of Blackstone Real Estate and Real Estate Roundtable Board Member, said, “The lack of housing supply is a national crisis. We are proud to support Home Partners’ mission of addressing housing access and affordability while also providing underserved populations with a new path to homeownership. Blackstone’s scale and long-term capital make a program like this possible.” (GlobeSt, Jan. 18)
• Home Partners intends to use the Blackstone funds for purchasing approximately 4,000 homes over the next two years that will benefit eligible individuals and families facing challenges to homeownership, including lower credit scores and lack of savings. (News release, Jan. 14)
• Bill Young, co-founder and CEO of Home Partners of America, said, “Our Choice Lease program is providing a critical service to many who would not otherwise be able to access the housing market. We are grateful that our partners at Blackstone have provided the support needed to implement this initiative. We have a unique opportunity to drive change that will help these groups access quality homes while providing a clear and transparent path to homeownership.” 

Program Details 

• Bloomberg reports that Home Partners buys a home on behalf of its Choice Lease client, and rents it back on a series of one-year leases. Blackstone confirmed that throughout the lease, the tenant has the option to purchase the house at any time.
• Choice Lease’s rental and purchase options, as well as free financial education and counseling programs, come as a housing shortage pushes rents and purchase prices higher throughout the United States. (National Mortgage Professional, Jan. 17) 

• Choice Lease is intended for households who earn 80% or less of the area median income. The program also offers residents rental rates 10% lower than market rates – and caps a home’s eventual purchase price at a 3.5% annual increase. (Information on the Choice Lease Program and Chicago Agent Magazine, Jan. 17)
   
• Home Partners has implemented Choice Lease in four metropolitan areas, including Atlanta and Phoenix, and is expanding the program to thirteen other markets. (Bloomberg, Jan. 14) 

The affordable housing shortage is one of the most important and complex political problems in America, and The Roundtable continues to work with our national real estate organization partners to jointly advocate for policies that will help to enhance the supply of safe, affordable housing. 

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The increasing cost burden of rental housing is now reaching middle-income Americans, according to a Harvard University Joint Center for Housing Studies (JCHS) report, America’s Rental Housing 2020.   Federal Reserve Bank of Minneapolis President and CEO Neel Kashkari introduced the report at a Jan. 31 event.  “We need a lot more private sector development to come in, build many, many more units across the spectrum, create more supply, that’ll make things more affordable for everyone.  Unless we unlock the private sector, we’re never going to help the vast majority of people who are struggling with affordability today,” Kashkari said.  (KSTP video, Jan. 31)

• Kashari noted the challenge is how to encourage the private sector to create and preserve affordable housing alternatives at scale so that other targeted government programs can also do their part.  “Our research has shown, as many others have shown, that if the private sector builds more units, even market-rate units, it adds supply to a city or region that ends up creating space for everybody, Kashkari said. (YouTube video of JCHS event and ULI’s Urban Land Magazine, Feb. 5)

   

• The latest research from Harvard shows rising rental demand and constricted supply have reduced the stock of low- and moderate-cost units.  This shift has significantly altered the profile of the typical renter household, resulting in a growing number of renters with incomes between $30,000 and $75,000 paying more than 30 percent of their income for housing – meeting the definition of “cost-burdened.” (JCHS interactive map of the U.S.).

   

• The report also notes that the rising cost of affordable rentals has resulted in a majority of lower-income renters spending more than half of their monthly income on housing – conditions that have led to increases in homelessness, particularly in high-cost states. (Bloomberg, Jan. 31 and JCHS chart)

   

• According to the JCHS, climate change also poses a threat to the stability of American renter households.  Between 2008 and 2018, 10.5 million of the country’s 43.7 million renter households live in zip codes that incurred at least $1 million in home and business losses due to natural disasters.  Additionally, 8.1 million renter households report that they do not have the financial resources to evacuate their homes if and when a disaster strikes.

• The report’s Executive Summary concludes, “Local governments have found themselves on the front lines of the rental affordability crisis. In response, many jurisdictions have adopted a variety of promising strategies to expand the affordable supply, including increased funding and reform of zoning and land use regulations to allow higher-density construction. Organizations ranging from hospitals and universities to tech companies have also started to address the crisis. Ultimately, though, only the federal government has the scope and resources to provide housing assistance at a scale appropriate to need.” (PDF of entire JCHS report)

   

  Industry Response

   

  The Real Estate Roundtable’s recently released 2020 Policy Agenda addresses affordable housing challenges facing the nation’s communities.   The policy agenda states, “The Roundtable aims to galvanize policy makers and like-minded real estate organizations around a set of pro-housing recommendations designed to increase the dearth of affordable units across the nation. ‘One-sizefits-all’ rent control mandates and anti-eviction laws will only further distort the housing supply-and-demand curve without addressing the underlying conditions that create market shortages in the first place.”

   

• The Roundtable recommends more enduring solutions, such as:

   

  • Federal grants could put a premium on local commitments to high-density zoning, the expansion of by-right multifamily zones, transit-oriented growth and affordable housing.

     

  • Ensure that banks receive “credit” under the Community Reinvestment Act for lending to middle class families.

     

  • Support the production of manufactured housing.

     

  • Free up under-utilized federal properties for affordable housing development.

     

  • Consider the impact of student loan debt on federally-backed mortgage qualification.

     

  • Short-term housing rentals must be regulated to combat long-term housing shortages.

     

• The Roundtable also remains focused on legislative and regulatory action that will increase the availability of housing, like a more robust low-income housing tax credit program from Congress and a plan to reasonably reform Fannie Mae and Freddie Mac.  On Jan. 21, The Roundtable submitted a suite of policy suggestions to the Department of Housing and Urban Development (HUD) to improve access to affordable housing.  (Roundtable Weekly, Jan. 17) 

   

• The Roundtable’s comments to HUD offer policies intended to bring more safe, decent, and affordable housing within reach of indigent and low-income households.  It also urges HUD to focus on the scarcity of homes accessible to middle class families, and recommends policies to increase both purchase and rental options for teachers, first responders, and other contributors in America’s workforce. 

During The Roundtable’s State of the Industry meeting last week in Washington, DC, a discussion of housing availability and affordability featured Federal Housing Finance Agency Director Mark Calabria and Rep. Patrick McHenry (R-NC), Ranking Member of the House Financial Services Committee. (Roundtable Weekly, Jan. 31)

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