Tracking Housing Instability to Its Roots
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Tracking Housing Instability to Its Roots
By Tommy Herbert
Though apartment demand is expected to soften somewhat nationwide in the next decade, migration trends will likely continue to drive growth in housing demand here in the Commonwealth for years to come. According to new research from the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC) we will need to produce 7,000 new apartments every year until 2035 if we plan to meet that growing demand.
That is important for Virginia’s housing providers to know, because so many of the issues that manifest as landlord/tenant problems or barriers to housing for the most vulnerable citizens have their roots in the profound shortage of housing available for the growing number of Virginians. As VAMA members taught me, and I often remind policymakers, we are in the business of getting people into housing, not keeping them out of it.
Low vacancy, artificially depressed throughout the pandemic by rent relief and eviction moratoria, drives rents higher while “Not in my back yard,” (NIMBY) opposition and red tape from local governments choke off the housing industry’s ability to respond with more supply. Especially as waiting lists for vital permanent housing aid grow, close, and languish, more and more people compete with less and less resources against more other applicants for less units on the market.
This spiraling dynamic creates cycles of poverty that trap people for years. It makes housing instability more likely and prolonged for renters who fall behind or experience an outside financial hardship. That produces awful effects for not only those families, but for our society as a whole. Growing housing instability requires higher expenditures from local and state governments to ameliorate. That necessitates local governments escalating their financial intake, through mechanisms like property taxes or permitting fees. Those costs, in turn, depress the viability of new housing construction, which worsens the shortage and starts the vicious cycle all over again.
In the best of times, new housing construction is difficult to “pencil out,” or make sense financially for an investor. Costs like land, materials, financial service, and labor gobble up budgets before barriers set by outside forces like government can even be considered. Local government costs to build housing, as well as the costs to address NIMBY opposition can often present a final coffin nail to a proposed project. That is before the cost of operations is taken into account as well. Research shows that of every dollar paid in rent, only about nine cents survive to become profit, after mortgage, taxes, operating costs, and property maintenance.
So many of the issues facing renters and housing operators right now have their roots in this spiraling gap between the amount of housing that we, as Virginians, need, and the amount of housing that we have. That is why every possible barrier to new housing construction that can be brought down, must be.
