Why The South And Southwest Are At The Forefront Of Affordable Housing
In the wake of the 2008 financial crisis, homeownership has become a nearly unobtainable dream for millions of American families. Affordable housing — defined as housing with a monthly cost of less than 30% of household income — is a critical component of the multifamily industry, but 2017 promises to be a challenging year for this product type.
Increasing costs of construction and a market for low income housing credits that fell has slumped since the election create a difficult environment for the construction or preservation of affordable housing. Markets all over the country continue to see a flood of new renters and increasing rents.
From A National Standpoint
A 2016 report by Harvard University’s Joint Center for Housing Studies writes that over one-third of American households spend 30% or more of their income on rent. A Capital One report noted that between 2006-2014 the 11 biggest metro areas in the United States — New York, Los Angeles, Chicago, Houston, Dallas, Atlanta, Boston, Washington, DC, Miami, Philadelphia and San Francisco — witnessed an increase of almost 22 million renters. But this increase is not without consequence. By the end of the eight-year study, all of these metro centers consisted of majority renters, with the exception of Philadelphia and Houston and rents rose considerably in all of them.
Just as the income gap between the wealthiest 1% and lower income households widens each year, so too is the gap in supply between the housing available for each class. Despite the oversupply of apartments running a minimum of $8,500 a month, the scramble for affordable housing has become increasingly chaotic as New York residents of middle-class income levels drive deeper into Queens and Brooklyn to find housing they can afford.
It is a trend metro areas are facing nationwide. As rents fly to record heights, many tenants must shift their housing searches to the suburbs and exurbs. In the San Francisco and Bay Areas, for instance, several local municipalities have begun passing various forms of rent control. Residents new to the area with incomes below six figures are only able to afford housing as far out as the Central Valley — despite the lengthy commute to San Francisco and other Silicon Valley hubs.
The Southwest Is Booming ...
The two most affordable cities remain Dallas and Houston, even amid forecasts that Dallas/Forth Worth metro area prices are soaring. Despite home prices that currently average $233k — 3% below the national average — Local Market Monitor has predicted a 31% increase in three years due to a 3.9% increase in jobs last year. Austin, Dallas and Portland comprise PwC’s and the Urban Land Institute’s top three “gateway” housing markets sustained by “a diverse economy and ‘niche’ neighborhoods,” while San Antonio makes No. 20 on Forbes and Local Market Monitor’s affordability list.
Salt Lake City is even No. 5 on the report’s list of rapidly growing markets, solidifying the southwest as the newest go-to destination for renters on the hunt for affordable multifamily units.
... And So Are The South and Midwest
What we did not mention is that the top four on the rest of the list are Columbus, Richmond, Pittsburgh and Charleston — all booming hubs of the South and Midwest. Four Florida cities — Jacksonville, Orlando, West Palm Beach and Tampa — made Forbes and Local Market Monitor’s top 10 affordable American metro housing markets, marking continued strong recovery from the havoc of the 2008 recession. However, four cities is a insignificant drop from the previous year’s seven, as steady employment growth and stricter construction constraints result in slight value increases for Florida homes.
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