The Fordham University Real Estate Institute recently brought together experts from law, finance and real estate development for the panel discussion “Solving the Affordable Housing Crisis,” which highlighted the causes for the scarcity of affordable housing and potential solutions to this ongoing crisis.
Michael LaCour-Little, professor of finance at California State University, Fullerton, joined the panel remotely and was the first of the four panelists to speak. He laid the problem out: there has not been enough housing development in the country in more than 10 years, which is especially a concern for millennials looking to buy a home. This segment of the population”™s demand for affordable housing adds to pre-existing demands, yet supply remains limited, resulting in high prices.
“There are various sorts of estimates out there,” LaCour-Little said, “but in general, the belief is among economists that we”™re about three to five million units short of the number of housing units that we really need.”
New and prospective homeowners face stiffer challenges in the market than ever before, he continued, with baby boomers hanging onto properties longer, halting the release of houses out into the market for millennials and others to purchase. Potential bidders must also contend with cash buyers, including investors, snatching up properties. LaCour-Little also cited mortgage rates over the years as having greatly inhibited affordability for Americans.
“Interest rates are going up ”” the 30-year mortgage rate is roughly doubled in the last year,” he said. “That”™s one of the most rapid increases in interest rates that we”™ve seen in decades, and that”™s dampened affordability even more as homebuyers are priced out of the market at those higher rates.”
Jed Resnick, CEO of Douglaston Development, believed that restrictive government regulations are to blame in large part for the lack of more development of affordable housing.
“I know New York better than the rest of the country, but I think that a lot of what we encounter here is fairly emblematic of what happens in larger metropolitan areas across the country,” Resnick said.
Resnick agreed that the issue is one of supply not meeting with demand, pointing to a recent study from New York University”™s Furman Center that found “we”™ve built about 200,000 units of housing, both rental and condo, in New York City in the last decade. If you add you add 800,000 people and 200,000 units, you have a problem.”
While Resnick supported intervention by government agencies to incentivize development in disadvantaged and underdeveloped neighborhoods, he acknowledged such projects that encourage density are perceived as signaling gentrification and displacement to existing residents. Programs like Section 8 can help in making sustainability in such communities possible by offering new affordable housing in which tenants pay what they can afford, the federal government making up the difference in rent, he added.
“The bulk of Section 8 properties are ultimately coming in directly from HUD, and that”™s bankable. That”™s a 15- or 20-year contract and it”™s federally guaranteed,” Resnick said. “It makes it possible to finance a significant amount of capital out because you have this federal income stream, and it reduces the amount of public subsidy necessary.”
Chris Dunn, managing partner at Mission Peak Capital, described himself as a free market advocate, though he was adamant that the issue of affordable housing scarcity is only solvable with the assistance of the government. Without help in the form of abatements or subsidies, he said that there would be no reason for developers to not build what would get them the most profit, meaning that prices would be higher across the board.
“There are certain states that are just more friendly to zoning rights, or the way their laws are set up, you don”™t have to go to approval, as long as you can satisfy certain conditions you can develop there,” Dunn said. “There are others that are much more stringent, and there”™s no way you”™ll get a manufactured home community in their municipality.”
Dunn also identified pricing as being a huge issue in addition to scarcity. With house prices being so exorbitant, individuals and families who are of a lower economic stratum have few if any options in the housing market.
Katherine McAdams, director of MFH Affordable Lending at Wells Fargo, concurred with her fellow panelists on zoning being too restrictive and argued that single-family zoning and neighborhoods are an obstacle. She emphasized a more efficient use of existing space through the construction of accessory dwelling units that serve as extensions to existing houses.
“We need to build more housing, all kinds of housing,” McAdams said. “There isn”™t going to be an end of neighborhoods just because you can have a unit over your garage or in your backyard ”” but that creates a unit that”™s more affordable than something brand new, and that creates more living opportunities for people within an area.”
