Congressman Denny Heck from Washington’s 10th District made his viewpoint very clear at a recent housing forum when he told the audience that the cause of rising housing costs in our state was a supply issue, plain and simple.
The supply of housing is not keeping up with the demand for housing, pushing up costs. The focus of solutions to this problem needs to be dedicated to increasing housing supply, Heck insisted.
Congressman Heck co-chaired the New Democrat Coalition Housing Task Force, which published research findings titled, “Missing Millions of Homes.”
The coalition’s findings are summed up succinctly: “Housing is increasingly unaffordable because prices and rents are rising faster than wages because construction is not keeping up with demand.”
The solution is more incentives and less government regulation that will lead to more housing construction at all building levels, for all kinds of people at all income levels.
Barriers to Housing Construction
The National Multifamily Housing Council (NMHC) recently published their Housing Affordability Toolkit, which highlights tools designed to guide discussions regarding specific housing affordability policies and incentives.
According to their research, the combination of a shortage in rental housing, rising development costs, and stagnant incomes are driving the growing housing affordability crisis affecting U.S. cities. Growing rental demand, limited new construction, and rising development costs have caused rents to rise.
“Rental demand is outpacing supply, leading to growing affordability challenges that are spreading beyond low-income households,” the report states clearly.
Onerous local zoning and development processes add to the costs of development, which adds to the price of rent that renters incur. These local government-imposed costs have a significant impact on rents and need to be reduced.
“Over the past three decades, local barriers to housing development have intensified, particularly in the high-growth metropolitan areas increasingly fueling the national economy. The accumulation of such barriers – including zoning, other land use regulations, and lengthy development approval processes – has reduced the ability of many housing markets to respond to growing demand." This statement was taken from an Obama White House report in 2016.
The cumulative impact of state and local government policies, when layered together, can significantly raise the rent for new apartments. And yet, we continue to see elected officials propose new regulations which discourage housing production by adding costs, risks or uncertainty to the market. These policies substantially reduce the affordability of new apartments, despite their stated intentions otherwise.
State of the Nation’s Housing
The Joint Center for Housing Studies at Harvard University recently published its State of the Nation’s Housing 2019 report.
The report’s executive summary states: “With the economy on sound footing and incomes ticking up, household growth has finally returned to a more normal pace. Housing production, however, has not. The shortfall in new homes is keeping the pressure on house prices and rents, eroding affordability—particularly for modest-income households in high-cost markets.”
Low vacancy rates across the board are pushing up the prices of multifamily properties while also keeping the pressure on rents, according to the report. Conditions at the lower end of the market are especially tight, with high demand for a shrinking supply of low-cost units adding to affordability concerns.
“This report details broad advances in the apartment industry’s mission to tackle the housing affordability crisis while simultaneously illustrating just how far we all have yet to go to succeed,” said National Apartment Association (NAA) President and CEO Robert Pinnegar, CAE. “The finding that numbers of high-income renters continue to rise confirms what we have been observing operationally: that apartment living continues to grow in popularity and desirability as a housing choice, rather than a necessity.”
“The apartment industry must, however, have the ability to build housing at a broad range of price points to meet the diverse economic spectrum of housing demand growing quickly all over America,” said Pinnegar. “To achieve that future, the public and private sectors must work closely together at every level of government to remove barriers to apartment construction. These barriers persist in many parts of our country, as recent NAA research has confirmed.”
National Solutions Sought
Recently, President Trump signed an Executive Order Creating a White House Council on Eliminating Regulatory Barriers to Affordable Housing.
NAA and NMHC applaud the administration for its focus on housing affordability – a critical issue facing millions of Americans nationwide. Communities across the country are facing a housing affordability crisis. Rising costs, labor shortages and growing demand are all resulting in decreased housing supply.
“We must address the regulatory barriers and costs associated with creating housing that is affordable,” said Doug Bibby, President of NMHC. “Dealing with this crisis will take a partnership between all levels of government and the private sector. Working together, we can make real progress towards reducing the housing burdens so many families face.”
NMHC Executive Committee Member and WMFHA member, Clyde Holland from Holland Partner Group joined President Trump as he signed the Executive Order creating the White House Council. The council will look into approaches to reduce the regulatory burdens that drive up housing costs and worsen affordability challenges.
Washington apartments and their residents contribute more than $56.7m to the state economy every day. Many levels of state and local taxes rely on the development and renovation of quality rental housing. More and more people are choosing multifamily housing living as a lifestyle choice. Our industry needs to work harder to meet that growing demand.
Rent Control is Not the Answer
Disastrous policies such as rent control will not only drive away new housing development, as is now being seen in Oregon, but will also exacerbate the demand-supply imbalance responsible for rising pricing. It will also result in millions of lost dollars in state and local tax revenue needed for public benefit.
As with many ill-conceived policies recently proposed to address housing affordability, the result of policies like rent control is a reduction in housing supply and a worsening of affordability.
Short-term solutions to address housing affordability include, but are not limited to:
- Promoting local public-private partnerships
- Direct resident-based rental assistant programs
- Housing grants for rental assistance to low-income residents
- Emergency rental assistance to aid income-eligible residents facing housing emergencies.
- Property tax credits to cover the difference between the actual rent amount and what the renter is responsible for paying
- Property tax abatement for the development of new rental housing, or rehabilitation of existing rental housing that is occupied by low and moderate-income individuals
- State tax credits for those who contribute to a dedicated fund for the development of low to moderate-income housing
- Reduce regulatory impediments at the state and local level that stifle the development of affordable rental housing