The Affordable Housing Conundrum for Multifamily
We hear about it every election cycle. There is an affordable housing crisis in our country. And every politician has a plan to fix it. I don’t know about you, but every time I hear anything on this topic, I cringe a little.
A lot of the companies I’ve worked for managed and developed luxury assets in major markets around the country. I have absolutely built marketing strategies with the sole purpose of leasing $5,000/mo studio apartments. I mean, I can’t afford that. But clearly, the market tells us that many people can.
Unfortunately, a lot of people can’t afford $5,000/mo in rent and they’re running out of places to live. Just look to the Denver teacher’s strike as an example. Some of the teachers interviewed in a recent CNN article teach at North High School, just a few miles away from where my husband and I live. Our police officers, firefighters, nurses and teachers are having a very difficult time finding housing.
Yet, there’s a good reason for the high prices we see in major metropolitan markets. There simply aren’t enough apartment homes to meet the demand for housing. Local government red tape and rising taxes make it expensive and difficult to develop new communities. No, rent control isn’t the answer because it doesn’t work. All it does is create poor living conditions because owners are unable to make enough money to invest in regular maintenance of communities.
We Have a Public Relations Issue
Obviously, we’d like to see local governments do more to help with the affordable housing problem. But I believe there might be some out-of-the-box ways our industry can develop housing that is more affordable with a little creativity. There has to be because we have a public relations issue that could do quite a bit of damage to our industry in the years to come if we don’t find a solution even if local jurisdictions won’t help.
And I want to see the industry where I have worked for the last nine years thrive. I like that I play a role in someone finding their home because a home is an emotional thing. It’s the one place where we should feel safe. It plays a pivotal role in your life. Maybe this apartment is your first place after graduation. Maybe it’s your first home after a divorce. It’s where you bring home your new baby (or puppy). Maybe it’s your first home after you get married, or move to a new city. Our home plays a foundational role in our psychological development and emotional health. In Maslov’s hierarchy of needs, warmth and security are one of the basics. We can’t thrive without them.
If you thought I had the solution to the affordable housing crisis, you wildly overestimate me. But my hope is that these ideas, while not derived from extensive development experience or expertise, might help generate ideas that can work.
Balancing Affordability and Renter Desires
One thing to consider is our renter’s desires. It is human nature to sometimes confuse wants for needs and this rings true for apartment residents. Smart thermostats, electronic locks and enhanced security features are technological wants that are quickly becoming a “need,” instead of a perk, too much of the renter demographic. But these things cost money.
So how do we as an industry provide the basics of innovation and garner the ROI without raising rent to the point of unaffordable? Allowing residents to install their own smart technologies could be a start. Sure, there are some risks to this, but with the right policies and penalties for bad actors in place, this can reduce the rent for those who know how to sacrifice their wants for an affordable place to live. Once we strike the balance between technology and affordability, we’ll have solved a crucial piece to this puzzle.
Co-living and Tiny Homes
Could the solution be in the tiny-home trend? Or room-sharing services? We are seeing this as more of an option for those who can’t afford the rents of a downtown San Francisco or New York City. Could multifamily break into the roommate finder business? Or start splitting two bedrooms into two tiny one bedrooms? If you increase unit count that way, in theory, an operator could decrease rent and still make a profit.
Maybe the answer is in amenity services? With an optional add-on concierge or amenity fee? Maybe we lower base rents and add an additional fee for residents looking for concierge services that far exceed something like a Door Dash or Uber. Imagine calling down to the concierge to pick up dry cleaning, purchase concert tickets, go grocery shopping and pick up a loved one from the airport. All within one apartment community. Is this realistic? Who knows.
Reduced Move-in Costs
Security deposits, pet deposits and many other upfront fees also impact affordability, taking money from savings accounts that might save these workers when something bad happens to them. Maybe we decrease move-in costs by eliminating security deposits, enabling residents to leverage that high up-front cost and spread it over the course of their lease term instead. True lease insurance (not surety bonds) and pet insurance are both viable options today that reduce the up-front fees.
Workforce Housing Without the Unused Perks
What if we created housing specifically for the workforce. We kept the finishes consistent with Class A communities, but we scaled back on amenities to only those that make sense. A swimming pool, outdoor playground, pet park and plenty of parking spaces. We could install smart locks and outlets in the living room and bedrooms and possibly a smart thermostat…but that’s it. No state of the art fitness center, no conference room, movie theater or rooftop lounge. But they have an affordable home that is well managed, upgraded finishes and technological conveniences all in the same city where they work. I mean, that sounds like a dream come true to me.
The point is, our industry has to do something to address the crisis. And our commitment to be part of the solution has to mirror our commitment to rent growth, technology advancements and creating homes by the thousands.