While property values and home sale prices have consistently shown record highs in recent months, the latest data paints a tough picture for many households. It is an opportunity for investors to step up to help and be compensated well for it.
Affordable Housing Beyond Crisis Point
Affordable housing was already at crisis point well before COVID-19 and all the chaos of 2020. It’s only getting worse.
According to the data from CNBC, there is now no state in the US where the average worker can afford an apartment. In fact, the National Low Income Housing Coalition reports that minimum wage workers cannot even afford a one bedroom rental in 95% of US counties.
They would have to work almost 80 hours a week just to afford a one bedroom apartment, and almost 100 hours a week for a two bedroom rental. That’s more than two full time jobs. In California, you’d have to be earning at least $37 an hour (or three times the minimum wage) to be able to afford a modest two bedroom rental.
This is only likely to get tougher given recent income interruptions, dramatic shrinking of the job market, and the end of stimulus checks for the unemployed and average wage earning households.
Missed Mortgage Payments
According to a new Apartment List survey, 30% of US households missed housing payments in July 2020. That follows very similar numbers in May and June.
While some temporary eviction and foreclosure moratoriums may have remained in place until August 2020, they were expected to only cover around 25% of the population.
Without a guaranteed housing or rental program from the government, it seems almost inevitable there will be a fresh foreclosure tsunami or series of waves at some point in the near future. Most likely after the 2020 election. Millions appear to have no choice but to become renters.
Local Governments Hoping, But Floundering
Local governments see the need, but are struggling with solutions.
They see the issues with schools being interrupted, homelessness, and workers unable to afford housing. Some have posed multi-million dollar budgets for acquiring or building affordable housing, or offering big tax credits.
Unfortunately, they aren’t very good at delivering. Certainly not efficiently or affordably. In LA we’ve seen apartments for the homeless costing $500k. In many other parts of the country, newly built ‘affordable housing’ apartments remain vacant, because they simply are not affordable.
Counties and states are already under pressure to dramatically raise local taxes to cover damage from pandemic costs. They will have a hard time finding room to pay for affordable housing initiatives.
This creates more room and need for private investors to step up and manage affordable housing. There’s potential for tax credits, or to build, renovate, and sell truly affordable housing to local governments.
Millions are facing a housing crisis, even though property prices are rising. This is a great moment for individual investors to have an impact with their investments. It can help them achieve appealing returns with the backing of hard assets. This may cover everything from acquiring and leasing multifamily apartments to renovating and reselling value add opportunities. It can also cover self-storage, which is expected to grow in demand as millions face the need to move.