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A Different Look at Affordable Housing

Affordable Housing
December 2018

A tour of “affordable” apartments in the Charlotte market gave local public officials a new perspective on its area’s housing situation.

If you’re a regular units Magazine reader, you’re no stranger to the conversation concerning the top tiers of the marketplace, such as last year’s piece, “The ‘Controversial’ Case for 50 Percent Rent Hikes.” This is an engrossing subject for our associations and industry: The inherent business interests of maximizing profits vs. the public relations aspect of making housing less affordable for consumers.

This is also an opportunity to survey the lowest tier of the marketplace. This is the essence of where non-subsidized housing meets the demand of low-income households.

Realistically, there are significant outlays to maintain any property – and those costs vary across the towns and cities of the United States. Private operators would build and lease apartments for less if it penciled out; however, that desire has to be balanced with maintenance, improvement and repair.

In this strata, at the lowest tier of the marketplace, is where one would find the lowest-cost rental housing. These apartment operators should be commended (not scorned) for providing inexpensive housing that is far more plentiful and meets a greater need than any subsidy programs.

To help raise greater awareness and understanding of this issue, the Greater Charlotte Apartment Association (GCAA) organized a tour of older, market-rate apartment communities in October and welcomed members of Charlotte City Council, low-income housing advocates, for-profit, non-profit and public housing providers, architects and others.

There, GCAA educated the group by addressing the question: “What does $750 to $800 a month for a 2-BR apartment get for you in Charlotte these days?” Many observers knew about new apartment developments, communities going through rehabilitation and ones with public subsidy components — but not many are knowledgeable about older communities built four or five decades ago, which are a vital component of affordable housing in Charlotte.

Know ‘NOAH’

This visit showcased four communities that are representative of the “NOAH” (Naturally Occurring Affordable Housing) product type in Charlotte, and was done with an eye toward property conditions, dwelling unit characteristics, continued operation and sustainability.

The property tour was organized to study property values, rent rates, age, ownership, neighborhood geography, resident profile and other factors. Participating communities were Cedar Greene Apartments, English Garden Apartments, Eastland Village Apartments and Somerset Apartments.

This event showcased a sincere desire to convey to Charlotte representatives what these communities are like, who they serve and how operating these communities works without a public subsidy.

We engaged in this effort to redefine the term “affordable housing.” Recently, there has been an unfortunate habit among housing professionals and elected officials alike to use the term “affordable housing” exclusively in the context of assisted or subsidized housing. In fact, these terms have been conveniently, but also incorrectly and regrettably, replaced by the term “affordable housing.”

Previously, “affordable housing” and “housing affordability” referred to the relationship between incomes and housing costs across the economic stratification. It remains important for an entry-level nurse or firefighter to be able to find suitable, affordable housing commensurate with their income.

Based on qualifying criteria, used widely in the industry, entry-level workers making approximately $35,000 per year can afford a $950-per-month apartment. If such housing becomes scarce or unavailable, the market imbalance becomes of concern not only to the consumers and providers but also to elected officials and economic developers, as reasonably affordable housing is so imperative to quality of life.

“We saw four well-managed sites that served as good examples of how older apartments, if well maintained, can offer a good housing option to people of limited means,” Ed Driggs, Charlotte City Council District 7, says. “At the same time, rents for these have increased by as much as 40 percent during the past 10 years — more than the incomes of [the residents]. The challenge for us is to preserve this housing and its affordability.”

Leah Vanansky, Camp Construction Company, says, “It was really interesting to see the different apartment styles available. The apartments were much larger than I expected.”

Tyran Hill, Local and Regional Policy Officer, North Carolina Housing Coalition, says he appreciated the opportunity to take the tour.

“I think showing multiple properties and having numerous property managers speak about them helped to tell a fuller story,” Hill says.

Near-Crisis Levels

Today, in urban North Carolina jurisdictions, even new 1-BR apartments frequently approach the $1,300 per month level, while new 2-BR are commonly at or above the $1,600 level.

This is a result of escalating land, material, labor and operating costs. Even in the so-called “middle-market” of existing apartments, one-bedrooms typically rent for $900 and two-bedrooms rent for $1,050 (median levels).

While not at a crisis level, there is concern among many community members and leaders that affordable housing is getting more difficult to find as the wages of existing and relocating workers sometimes do not keep up with housing costs. It is well known that in California, and other high-cost housing markets, many consumers spend as much as 40 percent of their income on a dwelling.

At lower income levels, the affordability of housing can be more acute. For example, the retail clerk who makes $25,000 per year will be hard-pressed to afford even a $700 per month apartment – not to mention that there are few market-rate rentals available in sound condition at this rate. At even lower income levels, a gap exists between what the household can afford and what the market can deliver. The problem is a gap between the buying power of low wages and the fair cost of housing.

For those households with annual incomes of substantially less than $20,000, some sort of subsidy is usually needed to bridge the gap. Housing providers can help lower-income consumers with the problems of housing affordability by leveraging assistance programs such as the Low-Income Housing Tax Credit and U.S. Department of Housing and Urban Development rent subsidies or lowering the costs of development or by supplementing their rental payment. For workers making minimum wage and others with annual incomes in the $15,000 range, some form of assistance can help deliver housing that is neither overcrowded nor in marginal condition.

Non-profit and government agencies that act as advocates for these consumers are highly motivated to act on behalf of their clients and should be applauded. The economic gap between the ability to pay and the market costs of housing at the low end of the market has led to the plight of these housing consumers being the most visible and compelling.

There are multiple reasons why the term “affordable housing” is increasingly being used to describe public subsidy or tax-credit housing. First, it is a “code word” of sorts that may not conjure the negative connotations among neighborhood groups that “subsidized” housing unfortunately often brings. Second, the term addresses the economic gap through a subsidy, thereby making the housing more affordable to the consumers in question.

The problem with this somewhat narrow use of “affordable housing” is that it completely overlooks the broader, historic and very useful term that describes the degree of housing affordability throughout the marketplace. So, although lower-cost housing advocates, elected officials and even some of GCAA member housing providers are conditioned to using “affordable housing” in the wrong context, usage of the broader definition would serve to bring about greater clarity when we talk about housing needs and housing markets.