The Affordable Housing Crisis Is Getting Worse, Say Experts

The housing market, both home purchases and rentals, has been strong for property owners and managers. But those who need housing are in two groups: the haves and have-nots, according to experts, and there isn’t enough housing for the latter. That means some difficult questions for the industry, and the country.

“The pandemic has left millions of households deeper in financial distress,” says the Joint Center for Housing Studies of Harvard University in its report, The State of The Nation’s Housing 2021. Even with government assistance, many lower-income people have fallen behind on housing payments and there are still longstanding housing affordability issues that have only been exacerbated by economic turmoil as well as natural disasters that damaged homes and displaced people.

The current state builds on what had come before. “Was there an affordable housing crisis in 2019/?” Martha Peyton, managing director of real assets applied research at Aegon Asset Management, tells GlobeSt.com. “Yes, absolutely there was. Usually, if a median household needs to spend upwards of 30% of their income on rent, they are under rental pressures. That ratio has been indicating rental pressures in a lot of metro areas in the country. We also look at the ratio of income to median home prices. That also varies by metro area and that also shows buying a single-family home is out of reach for many, many households across the country.”

The reason stems from multiple factors. “The reduced supply of housing is explained by regulations and delays in permitting, rental controls in large cities and labor shortages in the construction industry,” Al Lord, founder and CEO of Lexerd Capital Management, says. “While supply is adequate in most markets in the US, reduced supply at certain affordable prices is especially noticeable in the Northeast and Western US.”

“Demand for quality affordable housing remains incredibly high, whether urban, suburban or rural parts of the country,” Aaron Pechota, executive vice president of development and head of affordable housing at the NRP Group, explains to GlobeSt.com. “Nearly every major market in the US is severely under supply and inflationary pressures brought on by the pandemic have made it increasingly difficult and more expensive to build and operate these communities.”

Even as lumber prices have dropped, other commodities’ prices are up and availability is often poor. Also, commercial real estate has an ongoing labor problem as developers are unable to get the number of people they need, even as the country faces a critical shortage of home construction.

“We’re seeing many owners and operators struggle to overcome high operating expenses, and builders paying sometimes double the cost for materials and labor,” Pechota says. “Wage growth will likely continue into the foreseeable future as employers compete for a very limited pool of workers. Companies will have to tackle these challenges until this shortage evens out, which we can anticipate will take a considerable amount of time.

But, beyond situational conditions, there is another force slowing creation of housing where it’s most badly needed.

“There’s a lot of opposition because there is a distaste for density,” Peyton says. “And people fear you’re going to put pressure on school systems. You’re going to put pressure on traffic, and traffic is already terrible. You’re going to put pressure on water. All of that is true, however it is also a fear of change, a desire to keep things the way they are.

Until the industry and country address such factors, the affordable housing crisis is likely to grow.