NEW YORK – David Dworkin doesn’t sugarcoat the housing situation currently facing too many American households.
“Housing affordability is the worst it’s been in generations,” said Dworkin, president and CEO of the National Housing Conference (NHC), a Washington D.C.-based affordable housing advocacy group.
He points to the chronic, ongoing lack of new affordable housing units, and exponential increases in home prices and apartment rents since the COVID-19 pandemic.
In 2019, NHC said buying a median-priced existing home required an income of $54,200 and affording a new home needed, on a national average, an income of $61,700.
Those days are long gone after the price hikes and socio-economic resets of the pandemic that hit in 2020.
Now, that income threshold stands at more than $110,800 nationally, according to an April analysis by New York-based financial firm Bankrate LLC.
Homebuyers need to make more than $100,000 in 22 states, including Montana ($131,357), Florida ($114,771), Idaho ($114,386) and Oregon ($129,129) to buy a median-priced home. In January 2020 (before COVID), only six states required incomes north of $100,000 to buy a house.
“You would have had to have doubled your income since the beginning of the pandemic to afford the same house now,” Dworkin said, noting similar upward trends for apartment rents.
Average apartment rents are now approaching $2,000 per month nationally and more than $2,500 per month in western states, according to Rent.com. That is double pre-pandemic levels.
What’s behind the increases
So, what’s driving the home purchase and rental cost spikes? The lack of supply, Dworkin says.
Dworkin said there simply hasn’t been enough new construction or redevelopment of affordable and workforce housing since the Great Recession and real estate market crash of 2007-09.
“The law of supply and demand is never repealed,” he said.
There are efforts underway to address that dearth. The White House, for instance, announced earlier this month $5.5 billion in grants to states, local governments and housing groups to bolster affordable housing efforts.
Earlier this year, the U.S. House of Representatives passed a bipartisan tax bill that includes financing and tax credits for developers and housing groups to build 200,000 new affordable units nationwide. The measure — which has backing from a bevy of affordable housing groups — has stalled in the U.S. Senate, however.
A deep hole
The affordable and workforce housing hole is deep, and there are numerous obstacles to addressing the problem.
Delia Hernandez, who heads the Oregon Department of Housing and Community Services’ public outreach efforts, said her state needs 584,000 new housing units over the next 20 years to meet affordable housing needs, but utilizing low-income housing tax credits to spur construction and development have run into obstacles related to caps on bond financing.
The Internal Revenue Service announced in late April that it is raising bond caps related to those housing tax credits for 2024.
“There are other external factors that can serve as impediments, such as setting up the foundational infrastructure to build more housing, the volatility of the market, which impacts construction costs, or zoning/permitting processes that can impact project timelines,” she said.
Inflation and labor continue to impact the costs of housing starts and apartment development, and interest rates — which were low and helped spur record home sales and price and rent increases during the pandemic — are now higher, adding to the mortgage costs and consumer debt.
U.S. household debt hit a record $17.7 trillion in the first quarter — up $640 billion from a year ago, according to the New York Federal Reserve Bank. Mortgage balances are up $190 billion from Q4 2023 and $398 billion from Q1 2023 and now total $12.4 trillion. Credit card and loan delinquencies are also up, according to the New York Fed.
Hannah Edwards, assistant director for Habitat for Humanity for KeyWest and the Lower Keys, said the housing situation in Florida has seen short-term rentals and second homes eating into supplies, and higher insurance costs fueled by premium hikes in areas prone to hurricanes, tropical storms and wildfires adding to cost burdens.
“It really makes a difference,” she said of the increase of second-home buyers and short-term rental landlords along Florida’s coasts. “It makes the housing we do have so much more expensive.”
Smaller towns and rural areas also are presented with specific housing challenges. They frequently don’t have the market size or scale to attract national builders and developers who can bring more higher density projects or more affordable subdivisions on smaller lots, according to Scott Hoversland, executive director of the Wyoming Community Development Authority.
“It’s very difficult to get developers to come here and do affordable housing here,” said Hoversland, referencing Wyoming’s small population of 581,300, which is smaller than the metropolitan areas of Daytona Beach, Florida, and Madison, Wisconsin.
The NIMBY factor
Dworkin said “not in my backyard” (NIMBY) resistance to new apartments and less-expensive and denser housing continues to be one of the biggest impediments to addressing the housing shortage.
He said there is an “intimidation factor” frequently associated with NIMBY opposition to new development. “They show up in force at zoning hearings and other public meetings, and they make a lot of noise,” Dworkin said.
He said NIMBY impacts on needed new housing construction are felt across communities encompassing urban, suburban, rural, conservative and progressive areas.
Dworkin underscored the economic importance of bolstering affordable and workforce housing stock and who is losing out when there is community opposition to new apartments and more affordable units. Those impacted include not only service workers but also teachers, health care workers, public safety employees and others.
“These are folks who make our coffee in the morning, who serve us lunch, who take care of our kids all day, who take care of our parents and grandparents, and come and rescue us if we get in a car accident,” he said.
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