Affordable housing: A truly complex issue and …
… we tend to avoid the realities of the discussion, honestly. It helps to start by level-setting. The first, and probably most important, thing to understand is that “affordable housing” does not necessarily mean “the projects.” It means that you’re spending less than 30% of post-tax income on housing:
The Department of Housing and Urban Development indicates that families paying more than 30 percent are considered “cost burdened, and may have difficulty affording necessities such as food, clothing, transportation, and medical care.”
Add this wrinkle: there is currently no state -- not one -- where someone could afford a two-bedroom apartment at modest rent if they were making minimum wage.
Add this wrinkle: while we are developing apartment complexes more and more, the competition for them is higher because, as we’ve noted, millennials and Z (who are starting to work and “leave the nest” now) aren’t buying homes until later.
Now we get to the more “real” wrinkles.
First, the narrative around the lack of affordable housing is often “Developers are greedy.” That can be true, yes. But the second step in most thinking is “The government should fix or regulate this.” That, unfortunately, often does not work -- historically and now.
Let’s start with the greed argument: it’s very expensive to develop an apartment complex. The big ticket items of construction (labor, wood, plumbing, electrical) tend to cost the same regardless of developing a luxury apartment or an affordable option. The finish-out (cheaper v. marble, let’s say, or rooftop pools vs. in-ground pools) is more expensive on the luxury side, but that’s still a small percentage of overall budget for a build. As a result of all these cost factors, the argument on the developer side will always be “I cannot possibly be profitable unless I turn this into a luxury complex.”
As Zillow noted as far back as 2016, the broader picture of renting and apartment complexes is all about low-end demand -- which remains high -- vs. high-end supply -- which seemingly is we all build. That’s a tricky intersection point. THIS is the DFW Market in a nutshell.
The reality: affordable housing is about the financing
If developers can get what’s essentially “cheap money” or “near-free money” from investors or bankers to build, they are more inclined to offer affordable options. If they’re building on a standard amount of investment or even out-of-pocket, there is very little incentive for them to pursue affordable strategies, even if they deeply believe it in their hearts. 60 Minutes did a whole piece on developers and affordable housing at the end of 2019, focusing on Seattle (and a little bit Denver). Those pieces tend to be 13-14 minutes long, and affordable housing is a very nuanced issue that can’t really be covered that well in 13 minutes. And, as you might guess, they left out a piece of the puzzle -- namely how corporations that employ thousands in a big city think about affordable housing:
“That was the backdrop in 2018, when the Seattle City Council moved forward with a plan to tax the city’s top-grossing businesses to raise tens of millions for affordable housing and homeless services. As the company with the highest tax bill, Amazon balked at the proposal, threatening to slow growth in the city. Amazon and other Seattle businesses branded the legislation a “tax on jobs” and planned a ballot referendum that led the City Council to repeal the tax just a few weeks after unanimously passing it.”
This whole debate in Seattle actually led to a special news report called “Seattle Is Dying.” Very dramatic, and it’s all because companies don’t want to be majorly-taxed, developers need to make money on their projects, and there’s not really a strong voice for those at the low-end of the housing demand arc.
This is truly one of those societal issues where the only way to solve it is to see two sides working together. Big business can’t solve it alone, and nor can developers or the government. It’s insanely nuanced. We don’t know how to solve it either! But we have some ideas of what’s happening around here --- >
So what’s happening in Dallas/Fort Worth?
The city of Dallas has a shortage of about 20,000 affordable units. Fort Worth has equivalent shortages, and decided to start building their own affordable projects with public-private partnerships. This circumvents some of the challenges above, but it’s not a perfect solution either.
The area has a program called TIF Affordable Housing, which used to be called InTown. If you make between $36,540 and $46,550 per year -- and also make 3x the rent -- you can qualify. There are currently about eight properties in Dallas that have TIF Affordable units. You can find rates and areas and more information here.
The philosophical: Is housing a right?
In late 2018, The Dallas Morning News straight-up went and called the affordable housing situation in DFW “a crisis,” noting that decent, hard-working people were hurting. This is a common narrative in these discussions. But then the flip side of the same narrative is: Is housing even a right? In a free market, shouldn’t your ability to be housed be based on what you can earn via contribution back to said market?
This is a very complex human rights issue, and it can’t really be solved in this blog post, no. Obviously there is no legally-protected right to housing; if there was, we wouldn’t have any homelessness.
One of the things here that people fail to realize is that homelessness is part of a much-bigger, deeply-connected ecosystem that involves corporate philosophy, the changing economy (more “gig” jobs), mental health, addiction, the criminal justice system, and much more than that.
I actually recently did a homeless count in Fort Worth -- it’s called a “Point In Time” count and it’s done in multiple cities around the U.S. in late January, as that’s typically a colder time -- and a judge was on my team. We talked a lot about these different issues, and he said one challenge for judges with low-income/homeless is that they often prefer the streets to jail time or affordable options / even shelters, just because there is a familiarity to them with how that culture works, and they broadly don’t trust what developers are throwing up. I had never thought along those lines.
So yes, this is all a very big problem, and developers want to be profitable. No one wants to operate apartment developing at a loss, and very few tenants would want to live in a complex that’s operating at a loss. Now your roof might leak, or your toilet might break, and the fix time is going to be lengthy.
The solutions here are not easy, in DFW or anywhere, but they are … bad pun alert … developing, albeit slowly. Public-private partnerships may be the clearest short-term path for now, as well as programs like TIF.
And it would help if companies would pay more, but don’t hold your breath on that anytime soon.
We’re not here to solve macro issues
We wouldn’t even be able to. We’re just here to help you navigate what you can and should spend now and where the best place for you to live is. Holler at us with any questions, anytime.