Tag Archives: tenant

Race, Poverty and Housing Policy

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Signing of the Housing and Urban Development Act

Signing of the Housing and Urban Development Act of 1965

Ingrid Gould Ellen and Jessica Yager of NYU’s Furman Center contributed a chapter on Race, Poverty, and Federal Rental Housing Policy to the HUD at 50 volume I have been blogging about. It opens,

For the last 50 years, HUD has been tasked with the complex, at times contradictory, goals of creating and preserving high-quality affordable rental housing, spurring community development, facilitating access to opportunity, combating racial discrimination, and furthering integration through federal housing and urban development policy. This chapter shows that, over HUD’s first 5 decades, statutes and rules related to rental housing (for example, rules governing which tenants get priority to live in assisted housing and where assisted housing should be developed) have vacillated, reflecting shifting views about the relative benefits of these sometimes-competing objectives and the best approach to addressing racial and economic disparities. Also, HUD’s mixed success in fair housing enforcement—another core part of its mission—likely reflects a range of challenges including the limits of the legal tools available to the agency, resource limitations, and the difficulty of balancing the agency’s multiple roles in the housing market. This exploration of HUD’s history in these areas uncovers five key tensions that run through HUD’s work.

The first tension emerges from the fact that housing markets are local in nature. HUD has to balance this variation, and the need for local jurisdictions to tailor programs and policies to address their particular market conditions, with the need to establish and enforce consistent rules with respect to fair housing and the use of federal subsidy dollars.

The second tension is between serving the neediest households and achieving economic integration. In the case of place-based housing, if local housing authorities choose to serve the very poorest households in their developments, then those developments risk becoming islands of concentrated poverty. Further, by serving only the poorest households, HUD likely narrows political support for its programs.

The third tension is between serving as many households as possible and supporting housing in high-opportunity neighborhoods. Unfortunately, in many metropolitan areas, land—and consequently housing construction—is significantly more expensive in the higher-income neighborhoods that typically offer safer streets, more extensive job networks and opportunities, and higher-performing schools. As a result, a given level of resources can typically house fewer families in higher-income areas than in lower-income ones.

The fourth tension is between revitalizing communities and facilitating access to high-opportunity neighborhoods. Research shows that, in some circumstances, investments in subsidized housing can help revitalize distressed communities and attract private investment. Yet, in other circumstances, such investments do not trigger broader revitalization and instead may simply constrain families and children in subsidized housing to live in areas that offer limited opportunities.

The final apparent tension is between facilitating integration and combating racial discrimination. Despite the Fair Housing Act’s (FHA’s) integration goal, legal decisions, which are discussed further in this chapter, have determined that the act’s prohibition on discrimination limits the use of some race-conscious approaches to maintaining integrated neighborhoods.

To be sure, these tensions are not always insurmountable. But addressing all of them at once requires a careful balancing act. The bulk of this chapter reviews how HUD programs and policies have struck this balance in the area of rental housing during the agency’s first 50 years. The chapter ends with a look to the challenges HUD is likely to face in its next 50 years. (103-104, citation omitted)

The chapter does a great job of outlining the tensions inherent in HUD’s broad mandate. It made me wonder, though, whether HUD would benefit from narrowing its mission for the next 50 years. If it focused on assisting more low-income households with their housing expenses (for example, by dramatically expanding the Section 8 housing voucher program and scaling back other programs), it might do that one thing well rather than doing many things less well.

Feds Financing Multifamily

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Brett VA

The Congressional Budget Office has released The Federal Role in the Financing of Multifamily Rental Properties. The report opens,

Multifamily properties—those with five or more units— provide shelter for approximately one-third of the more than 100 million renters in the United States and account for about 14 percent of all housing units. Mortgages carrying an actual or implied federal guarantee have been an important source of financing for acquiring, developing, and rehabilitating multifamily properties, particularly after the collapse in house prices and credit availability that accompanied the 2008–2009 recession. According to the Federal Reserve, the share of outstanding multifamily mortgages carrying such a guarantee increased by 10 percentage points, from 33 percent at the beginning of 2005 to 43 percent at the end of the third quarter of 2014. (A slightly larger increase of about 16 percentage points occurred in the federal government’s market share of the much larger single-family market.) Such guarantees are made by a variety of entities, and some policymakers are looking for ways to make the federal government’s involvement more effective. Other policymakers have expressed concern about that expanded federal role and are looking at ways to reduce it. (1)

This debate is, of course, key to housing policy more generally: to what extent should the government be involved in the provision of credit in that sector?

This report does a nice job of summarizing the state of the multifamily housing sector, particularly since the financial crisis. It provides an overview of federal mortgage guarantees for multifamily projects and reviews the choices that Congress faces when it decides to determine Fannie and Freddie’s fate. That is, should we have a federal agency guarantee multifamily mortgages; take a hybrid public/private approach; authorize a federal guarantor of last resort; or take a largely private approach?

We should start by asking if there is a market failure in the housing finance sector and then ask how the government should intercede to correct that market failure. My own sense is that we intercede too much and we should move toward a federal guarantor of last resort with additional support for the low- and moderate-income subsector of the market.

 

 

 

What’s Pushing Down The Homeownership Rate?

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USDA New Homeowner

S&P has posted a report, What’s Pushing Down The U.S. Homeownership Rate? It opens,

Seven years after the Great Recession began, a number of key economic factors today have reverted from their short-term extremes. Home prices are rebounding, unemployment is declining, and optimism is rising ­­among economists if not among financial markets­­ that the U.S. economy may finally be strong enough to withstand a rate hike from the Federal Reserve. All these trends point to reversals from the recession’s dismal conditions. Even so, one telling trend for the nation’s economy hasn’t yet reverted to its historic norm: the homeownership rate. The rising proportion of renters to owner ­occupants that followed the housing market turmoil has yet to wane. Compound this with tougher mortgage qualifying requirements over recent years, and it’s not surprising that the homeownership rate, which measures the percentage of housing units that the owner occupies, dropped to a 50­ year low of 63.4% in first­ quarter 2015. However, the further decreases in unemployment and increases in hourly wages that our economists forecast for the next two years may set the stage for an eventual comeback, if only a modest one. (1)

S&P concludes that many have chosen not to become homeowners because of diminished “mortgage availability and income growth.” (8) Like many others, S&P assumes inthat the homeownership rate is unnaturally depressed, having fallen so far below its pre-bubble high of 69.2%. While the current rate is low, S&P does not provide any theory of a “natural” rate of homeownership (cf. natural rate of unemployment). Clearly, the natural rate in today’s economy s higher than something in the 40-50 percent range that existed before the federal government became so involved in housing finance.  And clearly, it is lower than 100% — not everyone should be or wants to be a homeowner. But merely asserting that it is lower than its high is an insufficient basis for identifying the appropriate level today.

I think that the focus should remain on income growth and income inequality. If we address those issues, the homeownership rate should find its own equilibrium. If we push people into homeownership without ensuring that they have stable incomes, we are setting them up for a fall.

Rapid Growth for Property Managers

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hot air balloons

Buildium.com quoted me in Can Rapid Growth Endanger Your Business? It reads, in part,

For property managers, the prospect of rapid growth can be thrilling. You lease the units in your first building, fill vacancies quickly, add services that let you charge higher rent, the building owner compliments your work, and before you know it, you’re thinking: “Why not more?” After all, why waste a great opportunity to make more money by simply repeating what you’ve done so well at your first property? All the stars seem aligned…

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7 Steps to Find Out If You’re Ready to Expand Your Property Management Portfolio

Here are seven steps to take before fast-tracking you company’s expansion:

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#6: Know the local rules & the laws

If the buildings you manage are different entities — one rent-controlled and the other a cooperative in an historic neighborhood, for example — you must understand their different requirements. The same can hold true for buildings in different communities where regulations covering trash pick-up and snow removal may vary.

And differences can be even greater for buildings in different states. In New York City, multifamily buildings with more than four units [may be] rent-regulated and involve a complex set of regulations between landlord and tenant, says attorney David Reiss, a professor of law and the Research Director at Brooklyn Law School’s Center for Urban Business Entrepreneurship. “If you don’t know what they are, it can be a recipe for disaster,” he says.

Also important to know, he says, is that some buildings are located in historic districts, which the Landmarks Preservation Commission can authorize, and that affects how owners and managers can renovate, rehab, and maintain exteriors, Reiss says. “You might have to place an air conditioning unit a certain way.”

#7: Consult with other property managers

Besides doing your homework, talk to owners and managers of similar properties who’ve expanded beyond a single listing. Reiss says many communities have property management organizations that share information, or your city or town may have an association of like-minded businesses. If not, maybe, you can become a local hero by starting one.

 

From Owners to Renters

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Frank Nothaft

Frank Nothaft

CoreLogic’s July issue of The MarketPulse has in interesting piece by Frank Nothaft, Rental Remains Robust (registration required). It opens,

A vibrant rental market has been an outgrowth of the Great Recession and housing market crash. Apartment vacancy rates are down to their lowest levels since the 1980s, rental apartment construction is the most robust in more than 25 years, rents are up, and apartment building values are at or above their prior peaks. But the rental market is more than just apartments in high-rise buildings.

Apartments in buildings with five or more residences account for 42 percent of the U.S. rental stock. Additionally, two-to-four-family housing units comprise an additional 18 percent of the rental stock, and one-family homes make up the remaining 40 percent.

The foreclosure crisis resulted in a large number of homes being acquired by investors and turned into rentals.  Between 2006 and 2013, three million single-family detached houses were added to the nation’s rental stock, an increase of 32 percent. The increase in the single-family rental stock has been geographically broad based, but has impacted some markets more than others.

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While the growth in the rental stock has been large, so has been the demand. Some of the households seeking rental houses were displaced through foreclosure. Others were millennials who had begun or were planning families, but were unable or unwilling to buy. (1-2, footnotes omitted)

Nothaft’s focus is on the investment outlook for rental housing, but I find that his summary has a lot to offer the housing policy world as well. He describes a large change in the balance between the rental and homeowner housing stock, one that has had an outsized effect on certain communities and certain generations.

Housing policy commentators generally feel that the federal government provides way too much support to homeowners (mostly through the tax code) and not enough to renters. Perhaps this demographic shift will spur politicians to rethink that balance. Renters should not be treated like second class citizens.

The Housing/Income Affordability Gap

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We need affordable housing

The Urban Institute has issued a policy brief, The Housing Affordability Gap for Extremely Low-Income Renters in 2013. The brief opens,

Since 2000, rents have risen while the number of renters who need low-priced housing has increased. These two pressures make finding affordable housing even tougher for very poor households in America. Nationwide, only 28 adequate and affordable units are available for every 100 renter households with incomes at or below 30 percent of the area median income. Not a single county in the United States has enough affordable housing for all its extremely low-income (ELI) renters. The number of affordable rental homes for every 100 ELI renters ranges from 7 in Osceola County, Florida, to 76 in Worcester County, Maryland.

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This brief is the first publication on housing affordability to combine detailed county-level data on ELI renter households (those with incomes at or below 30 percent of the area median) and the impact of US Department of Housing and Urban Development (HUD) rental assistance. Its four key findings:

  • Supply is not keeping up with demand. Between 2000 and 2013, the number of ELI renter households increased 38 percent, from 8.2 million to 11.3 million. At the same time, the supply of adequate, affordable, and available rental homes for these households increased only 7 percent, from 3.0 million to 3.2 million.
  • The gap between ELI renter households and suitable units is widening over time. From 2000 to 2013, the number of adequate, affordable, and available rental units for every 100 ELI renter households nationwide declined from 37 to 28.
  • Extremely low-income renters increasingly depend on HUD programs for housing. More than 80 percent of adequate, affordable, and available homes for ELI renter households are HUD-assisted, up from 57 percent in 2000.
  • The supply of adequate, affordable, and available units varies widely across the country. Among the 100 largest US counties, Suffolk County, which includes Boston, comes closest to meeting its area’s need, with 51 units per 100 ELI renter households.Denton County, part of the Dallas-Ft. Worth metropolitan area, has the largest housing gap,with only 8 units per 100 ELI renters. Rust Belt areas (e.g., Detroit, MI; Chicago,IL, and Milwaukee, WI) have seen large declines in adequate, affordable, and available units. Most counties had fewer units available in 2013 than 2000. Notable exceptions to this trend include Suffolk, MA; Los Angeles, CA; and Miami, FL, which have expanded their number of available units since 2000. (1-2, footnote omitted)

The brief concludes, “Simply put, virtually no affordable housing units would be available to ELI households absent the continued investment in federally assisted rental housing.” (14)

This is an affordable housing story, but it is just as much an income story — low-income households are getting left behind in the race between rising income and expenses. One solution is to expand housing assistance for low-income families. Another is to increase income, one way or another. The bottom line, though, is that low-income households don’t have enough to make a go of it in these United States.

The Road to Rent-To-Own

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Rent To Own Sign

TheStreet.com quoted me in Rent-to-Own Homes Can Be a Risky Option for Buyers. It opens,

Instead of shelling out thousands of dollars to rent a home each month, some landlords give their tenants the option to buy the home while they are leasing it — using the rent they’ve paid as a credit toward their mortgage downpayment.

But while rent-to-own options appear like a winning proposition for potential homeowners who have not been able to save up enough money for a down payment or lack a good credit score, these deals can be fraught with many setbacks.

Each state is governed by different laws, and some of them protect homeowners in case they fall behind on payments, said David Reiss, a law professor at Brooklyn Law School. This is a crucial point that needs to be addressed with a lawyer before the contract is signed, because a consumer could end up “losing everything” that he had paid toward the house if he loses his job, Reiss added.

“Rent-to-own transactions can be very complicated and there are fewer consumer protections available, so interested buyers should beware,” he said. “There are a lot of shady operators out there.”