At the Urban Land Institute’s "Future of Housing Policy in America" policy symposium Wednesday, held at the Washington, D.C., office of business advisory firm The Collingwood Group, the rental market was on everyone’s mind—even when it came to discussing single-family homes.
Ron Terwilliger, chairman of Dallas-based Trammell Crow Residential (TCR) and chair of the Terwilliger Center at ULI, started his panel, the second of the day, with some stats. Right now, he noted, 34 percent of American families choose to rent, and, since 2004, four to five million households have become renters. Part of that is due to foreclosure, but part is also by personal choice.
“You tend to lose mobility [by buying a home], which has been proven out in spades in this recession,” Terwilliger said.
But that interest in renting has squeezed the rental market, and things may only get worse as more households choose renting without new supply being added.
Things are already bad: Terwilliger cited Harvard Joint Center numbers that show that 26 percent of renters spend more than 50 percent of their incomes on rent, a condition for which both housing and income are to blame.
“The biggest challenge is that we have an income problem and we’re trying to solve it through housing programs,” said Eileen Fitzgerald, CEO of Washington-based NeighborWorks America.
Little Federal Help
With the budget-cutting fervor in Washington lately, Fitzgerald said it’s not going to be easy to fund programs, like Section 8, to the extent that they had been funded in the past. Henry Cisneros, former HUD secretary and current chairman of CityView, a Los Angeles–based developer of affordable housing, admitted on the first panel of the day that the biggest hit in the budget was to domestic discretionary programs. Of course, that puts housing directly in the crosshairs of the budget cutters. The mortgage interest deduction [MID] could also be a target.
“Even if [the MID] is taken [away], there's no assurance that money will come to housing programs,” says Ali Solis, senior vice president of public policy and corporate affairs for Columbia, Md.–based Enterprise Community Partners, who was also on Cisneros’ panel.
The question is: How do developers and housing officials address the shortfall in affordable and workforce housing with limited resources?
Alan Wiener, managing director of Wells Fargo Multifamily Capital, fresh from a meeting with leaders from Singapore and Japan, said that maybe American developers should follow the lead of those from other countries and look at new ways of development that could lead to shared restroom facilities or new ways of handling accessibility. He also suggested pushing up the median income requirements for low-income housing tax credits.
“We should go up to 80 or 100 percent of median income requirements in high-cost areas,” Wiener said. But there are issues involved. “That can’t happen when you have a shrinking pie,” he admitted.
Doug Bibby, president of the National Multi Housing Council, said that local governments could provide some leadership with tax breaks, buy-downs on the cost of land, and donations of buildings and land to development.
The first panel of the day, with Cisernos, Solis, and former New York congressman Rick Lazio, spent a lot of time looking at turning foreclosed single-family homes into rentals. But there are issues with that, as well. One is investors deciding to bail. “If you run into trouble with 500 rentals and walk away, the implications for that community could be disastrous,” said Lazio.
There’s also concern about the location of the foreclosures. In many cases, these houses are not close to transit or the urban core, making them unsuitable for filling the real void in affordable housing near work nodes. “The REOs aren’t in the right place,” Fitzgerald said.
Cisneros said the big apartment owners he’s talked to don’t want to manage single-family homes, and he doesn’t think local government is capable of handling them either. “Let’s open it up and let small players do it,” he suggested.
But ultimately, both Cisneros and Solis think there’s potential in managing single-family homes as rentals and that it could help. “We can’t get the American economy back on track without a robust housing recovery,” the former HUD leader said.