If you are not part of the solution, you are part of the problem. That old chestnut from the bumper sticker wisdom of the ’60s applies very well to the apartment industry in the latter part of this decade.
Apartment owners, especially those with properties in the coastal areas and gateway cities for immigration, are about to enter an era of very substantial rent increases. More power to you. Go for it.
But while you are raising rents and saying goodbye to tenants who cannot afford the increases, think about the big picture. For many years, housing affordability was of little concern to the typical mayor or city council. They were more likely to oppose any plan to build affordable rentals than to facilitate it. Rent control was only enacted or preserved in the most liberal cities in America.
Guess what? Housing affordability is becoming a serious issue in more American communities every day, and rental housing owners need to be cautious, lest they be viewed as part of the problem, rather than part of the solution.
I am not suggesting that anyone should hold back from maximizing income from his or her property. But I know that landlords make a very tempting target when politicians need someone to blame for the fact that their low- and moderate-income citizens cannot afford a decent place to live. And the number of people who will have trouble affording a place to live is going nowhere but up, up, and up.
According to Marcus & Millichap, demand for new U.S. apartments will average 430,000 units per year for the next 10 years. The firm expects net rent growth of 6 percent to 8 percent per year in most markets for several years.
The multifamily industry relaxed its vigilance against rent control as rents stagnated or fell in many markets in the first half of the decade. After all, there was no political pressure for rent control. But the pendulum may be about to swing back the other way.
It’s true that rent control is a draconian measure that won’t fly in most states and cities, but there are other ways cities and counties can force landlords to help address housing affordability.
The point is, participants in the multifamily industry should not wait until cities and counties force them to participate in affordable housing solutions. Like other players in the housing market, especially real estate brokers, our industry needs to be proactive because it is good for business and good for our society.
One key consideration is to help government policymakers frame the issue correctly. As a letter to the editor in this issue points out, the problem is not that housing costs are rising too much, it’s that wages are not rising fast enough to allow workers to afford increasing housing costs.
The federal minimum wage has remained at $5.15 an hour since September 1997, even as rents jumped 34 percent, according to the National Low Income Housing Coalition (NLIHC). Congress came close to passing an increase in the minimum wage this year, but political posturing caused that measure to die. That’s typical of this Congress, and very unfortunate.
Even people earning well above minimum wage can’t keep up with the rising cost of housing. In San Francisco, the NLIHC found that to afford an apartment at the area’s fair market rent, a worker would need to earn $29.54 an hour. Even in the lowest-priced housing markets in Louisiana, before the recent hurricanes, a worker had to earn $8.10 per hour to rent a two-bedroom unit.
Apartment owners and developers cannot solve this problem on their own. But it’s clearly in their interest to work with government and nonprofit housing advocates to find solutions that work for everyone. Otherwise, you can be sure that they will end up taking the blame as rents continue to rise.