Median US home prices rose 25.5% from June 2020 to September 2021 according to the Federal Reserve Bank of St. Louis. This is the largest increase over any five-quarter time period since these figures began being tracked way back in 1963. While homeowners may feel good about this, many renters now look at home ownership as a dream delayed even further into the future.
There are two broad groups of renters: “renters by choice” and “renters by necessity”. The first, “renters by choice”, are financially able to buy a house, but for lifestyle or other reasons have decided to rent. Whereas “renters by necessity” are not in a financial position to make a down payment or afford the cost of buying and maintaining a home. The rapid home price increases, coupled with record inflation, are not making buying a home or continuing to rent any easier. In fact, home prices are pushing more “renters by choice” into “renters by necessity” as wage growth is not keeping up with home values and cost of living.
“Renters by necessity” within multi-family housing category consists of both Affordable and Workforce housing. Affordable housing is often defined as apartments designated for renters who make between 30-80% of the area medium income (AMI). Workforce housing is priced for renters who typically make between 80%-120% of AMI. Unlike affordable housing, workforce housing rents are determined by market pricing. Both are very much needed to give renters different price points to best match their income levels. Renters are considered housing cost-burdened when they spend more than 30% of their incomes on rent and utilities. Historically, the housing demand has out striped the supply for affordable and workforce housing and COVID has only widened the gap. One key component to helping solve this problem is “preserving” or restoring these assets as over time they can become tired, rundown, and even become obsolescent. As with many things there is typically not one simple answer, but rather several solutions that work together.
Housing is essential. At CommonGood, Affordable and Workforce Housing is one of our key areas of focus. To learn more watch this short video or listen to this podcast episode both featuring Russell Ginise of Alliant Strategic Investments, or contact us directly for more information.
– Jeff Shafer, CEO and Co-founder
