Affordable housing is one of the most discussed matters in real estate today. As the population continues to grow, one generation ages, another younger generation takes its place, and each has their own ideals when it comes to real estate. With such high demand, what is causing the lack of affordable housing and who is lending a helping hand?
For every 100 extremely low-income households in the U.S., there are only 29 adequate, affordable, and available rental units. Central Ohio alone is projected to grow from 1.8 million people to 2.3 million by 2040, an increase of 25%. What’s more, in the following decade...by 2050, the Columbus region is expected to grow by an additional 500,000 people which demand an additional 140,000 smaller lot detached single family homes, and 166,000 multifamily units.
Cost of Affordable Housing
With growing demand, why aren’t developers racing to build affordable housing options? Well, it is really a function of the gap between the income produced by market rent and affordable housing rent developments in a climate in which building costs are rising. To be considered affordable housing, the standard is that a family should pay no more than 30 percent of its household income on rent. High rents, no longer considered affordable, are leaving barely any options for the millions of low-income families looking for safe, affordable homes. Developers, despite their awareness of the affordable housing demand, are struggling to make financial sense of projects earning affordable rents in comparison to market rent developments.
To ensure there is an adequate supply of affordable housing for the region for the coming years, Columbus Mayor Andrew Ginther is proposing a $1.03 billion bond package that would include $50 million for affordable housing. Ginther says, “These funds would be used over several years in partnership with other private and public entities to construct new or renovate existing properties and alleviate some of the existing gaps in affordable housing”. But you may ask, why is this so important to the city? Less affordable cities are less attractive to start-ups and growing companies like Amazon, Google, and Microsoft. Growing companies are key players in helping a local economy thrive.
As the lack of affordable housing continues, large corporate initiatives are starting to lend a helping hand to solve the crisis. In the San Francisco Bay area, the Partnership for the Bay’s Future aims to raise $500 million from high-profile donors in an effort to build and preserve up to 175,000 units over the next 5 years. Microsoft, the Seattle based tech giant, plans to invest $475 million for affordable housing in Seattle over the next couple years. The recent creation of the Opportunity Zone Fund may increase developers’ ability to provide affordable housing over the course of the next decade. While the market doesn’t fully understand Opportunity Zones and the impact they may have on affordable housing just yet, this discussion will continue to evolve in the years to come.
For more information on how changes are shaping the future of commercial real estate and affordable housing in Columbus, OH, check out this blog.