Three Solutions for Safeguarding the Affordable Housing Supply

Three Solutions for Safeguarding the Affordable Housing Supply

Here are three solutions for safeguarding the affordable housing supply as the CARES act ends, according to a Stockton, California-based affordable housing advocate.

By Matthew Davies

In the coming weeks, the affordable-housing industry will be hit with the perfect storm.

President Trump’s recent memorandum extended federal unemployment benefits through December 27. Yet, those out of work will still receive a lesser benefit per week compared with the federal employment benefits provided under the CARES Act. Some are questioning the legality of the memorandum, leaving an industry in flux and 24 percent of Americans uncertain as to whether they will be able to make their next rent payment.

At the same time, federal eviction moratoriums that went into place following the COVID-19 pandemic have been lifted. Trump’s recent executive order doesn’t clearly extend the moratorium, but instead directs Health and Human Services and the Centers for Disease Control to evaluate whether stopping evictions is necessary, leaving low-income families subject to eviction proceedings after August 24.

Across the country, many states have, or are considering, extending the eviction moratoriums, which offers a welcome reprieve to renters in those states.

But rent forgiveness only passes the burden to the landlords who manage these properties, who have mortgages and property taxes of their own. With little to no rental income and no moratorium for paying mortgages and property taxes, owners and operators of affordable housing face a difficult choice: fight these eviction moratoriums in court or – unable to sustain their businesses – cut their losses and walk away altogether. The result is a devastating impact on an affordable housing stock that is already in short supply, at a time when increasing numbers of people need affordable housing.

 Why are owners and operators of affordable housing more deeply impacted than other property owners?

Affordable housing presents an array of challenges for property owners.

First, owners and operators of affordable housing operate on thinner margins than market-rate apartments, especially upper-end apartments. Second, a much higher proportion of affordable housing residents work in the “informal” economy, making them ineligible for unemployment benefits, much less the expanded benefits that were offered under the CARES Act. For these residents, help has come instead in the form of local jurisdiction ordinances that delay payment of rent and forestall evictions.

On the West Coast, these ordinances have been overly broad, allowing people to stop paying rent for any reason, regardless of whether their jobs were affected by COVID-19. At the same time, local governments are making delayed property tax payments hard for property owners to obtain. Local utility companies are offering no deferrals and GSO debt forbearance creates its own sets of undue hardship. The housing providers are bearing the brunt from all sides.

 A Complex Problem Requires a Multi-Faceted Solution

 The U.S. has a shortage of more than 7 million affordable homes and apartments for extremely low-income families, according to the National Low Income Housing Coalition (NLIHC). As housing production costs rise faster than incomes – particularly in light of the COVID-19 pandemic and its impact on jobs, this disparity is only poised to widen.

While a second coronavirus stimulus bill, if passed, will help citizens in the short term, bailouts like these are economically unsustainable for our country and they don’t solve the underlying issue: the shortage of affordable homes in the nation.

Increasing the number of affordable homes available to renters requires a three-pronged approach that includes short-term rental assistance for those in need, longer-term financial assistance to the developers, owners, and operators of affordable housing communities, and fewer burdens and zoning restrictions to encourage – rather than stifle – development.

 Landlords: Negotiate payment plans with tenants

Landlords should be willing to negotiate rent payments with their tenants when necessary.

Discuss what tenants can afford and then offer an alternative such as rental assistance, temporary rent subsidies, or a rent payback plan that is acceptable to both parties.

Banks, Lenders, Municipalities, and Utilities: Provide Assistance for Owners and Operators of Affordable Housing

Private and government lenders can help lessen the burden on the affordable housing industry by granting zero-interest bridge loans for property owners with a timeline that coincides with the government-mandated rental freezes. This type of assistance could help ensure the properties could remain operational until such time that renters are back to work and able to pay their rent.

For landlords who have a mortgage, the CARES act assisted by waiving late fees on mortgage payments or suspending foreclosures, and some lenders extended those moratoriums. To qualify, landlords must show proof of rental income losses to their lender. Finally, the Economic Injury Disaster Loan (EIDL) offers emergency grants up to $10K to small businesses impacted by the coronavirus.

State and Local Government Leaders: Adopt Policies that Encourage the Development of Affordable Housing

As previously mentioned, our nation has a shortage of affordable homes, which can be alleviated – at least in part – by increasing the supply. This means building affordable housing closer to population centers and closer to jobs, and doing so requires more permissive zoning and less red tape.

Further, we need to get creative with how we use the available land to accommodate more families. Tiny home communities are one option for providing homes for more families in less space, often accommodating 25-30 residencies per acre. High-rise apartment buildings also provide greater density, giving housing to about 300 people per acre, on average.

To protect the businesses that provide and maintain affordable housing requires safeguarding rental income, deferring at least some management costs, and cutting down barriers that preclude housing development in the areas where they are needed most. This is vital if we are to ensure the continuation of affordable housing that society relies on.

About the Author:

Matthew Davies is the founder of Stockton, CA-based Harmony Communities, which currently owns and operates thirty-three manufactured housing communities in the western United States. An investor and community development professional working for affordable hThree Solutions for Safeguarding the Affordable Housing Supplyousing solutions, Davies’ goal is to help bring the opportunity for homeownership to people in his home state who otherwise could not afford to buy a home.


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