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Multifamily Housing sits on the front lines on the battle of Affordable Housing

October 20, 2023

The United States is facing a crisis that affects millions: the lack of affordable housing. This issue has far-reaching consequences especially for low-income households, including the inability to access basic necessities such as nutritious food, healthcare, and education. 

This imbalance places immense financial strain on individuals and families, making it increasingly difficult to achieve housing stability. As a result, many people are turning to long-term renting as a more viable housing solution. However, renters face numerous challenges, including unpredictable rent increases, unsafe living conditions, and insufficient tenant protections.

The Impossibility of “Making Ends Meet”

A full-time worker earning the federal minimum wage of $7.25 per hour cannot afford a two-bedroom apartment at fair market rent in any state in the United States. In fact, the average hourly wage needed to afford a two-bedroom apartment is $25.82 – more than three times the federal minimum wage. 

Throughout the pandemic, rent prices rose nearly 22.5 percent, adding over $360 to monthly rent bills. In 2023, those prices have continued to inflate, with the average cost of rent in the United States standing at $2,011 as of October 2023. In metropolitan areas, the average monthly rent for a one-bedroom apartment can easily surpass $2,000, making it nearly impossible for low-income families to secure stable housing.

In heavily populated cities, like Manhattan, the demand for rentals continues to raise the rent prices in the region. In July, the average monthly rent in Manhattan reached a new high of $5,588, marking a 9% increase compared to last year and setting a new record. Median rent also achieved a new all-time high of $4,400 per month.

Yet Western states experienced some of the most significant drops in rent prices in recent months. For instance, Montana saw a nearly 15.5% drop on a yearly basis, ranking as the state with the largest rent decreases. Oklahoma, representing the South, ranked second with over 10% declines. These trends demonstrate the delicate balance of fluctuations across various markets and the need for comprehensive solutions to address affordable housing.

“While we expect a small annual decline in rental prices, it is important to note that rent prices are still significantly high. Affordability remains a primary concern in the rental market. As renters actively seek more affordable options, it is expected that affordable markets, particularly those in the Midwest region, will experience relatively faster demand-driven growth in rents.”  
Realtor.com economists wrote.

Recent initiatives, like the blueprint for a tenant Bill of Rights and the reclassification of multifamily loans by the Federal Housing Finance Agency, are gaining traction and making a difference. These initiatives are providing hope for families and improving their lives, one step at a time. 

Lasting Stabilizing Effects of a Tenants Bill of Rights

As the cost of homeownership continues to rise, more people are turning to renting as a long-term housing solution. However, renters often face challenges such as unpredictable rent increases, unsafe living conditions, and insufficient tenant protections. In response, many cities and states have implemented a Tenant Bill of Rights, a set of laws designed to protect renters from landlord abuses and ensure safe and stable housing. 

Recently, the Biden-Harris Administration announced new measures to promote fairness in the rental market and advance fair housing principles, including a Renters Bill of Rights blueprint. Among the key actions are the mandate for the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) to identify unfair practices that prevent renters from accessing housing, as well as the issuance of guidance and enforcement coordination with the FTC by the CFPB to ensure accuracy in credit reporting and background check procedures. 

Additionally, the Federal Housing Finance Agency (FHFA) will examine proposals that promote renter protections and limit rent increases for future investments, and the U.S. Department of Justice will conduct a workshop to explore anti-competitive information sharing in rental markets. The Department of Housing and Urban Development will also publish a notice of proposed rulemaking requiring public housing authorities and owners of project-based rental assistance properties to provide a 30-day advanced notice before terminating a lease due to non-payment of rent. The Biden-Harris Administration will hold quarterly meetings with tenants and tenant advocates to receive input on ideas to enhance tenant protections. 

These actions are in line with the principles outlined in the Renters Bill of Rights, which covers protections such as safe and affordable housing, clear and fair leases, renter rights education, and the right to organize. The Biden-Harris Administration is also launching the Resident-Centered Housing Challenge, which aims to encourage stakeholders to improve the quality of life for renters and drive policy changes at the state, local, and private sector levels.

Reclassified Multifamily Loans by the FHFA: What Families Need to Know

According to the NLIHC, there is a shortage of 7.3 million affordable and available rental homes for extremely low income renters in the United States. This means that for every 100 extremely low income renter households, only 33 affordable and available rental homes are available.

In recent developments, the Federal Housing Finance Agency (FHFA) has announced plans to reclassify certain multifamily loans as part of their efforts to maintain a safe and sound housing finance system. However, it is essential to understand the implications of this reclassification and how it may impact families who rely on these loans to access affordable housing.

Multifamily loans play a critical role in providing affordable rental housing, with a significant portion of these loans dedicated to the construction and preservation of affordable housing. The proposed reclassification by the FHFA would classify loans with payment delinquencies of 60 days or more as "non-performing" rather than "performing" loans. This shift in classification may result in stricter lending requirements, potentially discouraging lenders from issuing loans classified as non-performing.

Unfortunately, this change may lead to a reduction in the availability of affordable rental housing, as developers and organizations may struggle to secure the necessary financing for constructing or preserving affordable units. This situation exacerbates the already pressing issue of housing instability, especially for the 7.3 million extremely low-income renters in the United States who face a shortage of affordable rental homes.

It is crucial to analyze the potential benefits and concerns associated with the reclassification of multifamily loans. While the goal is to maintain a stable housing finance system, policymakers must consider the implications for families who depend on these loans for safe and affordable housing.

What’s Next?

The United States is at a pivotal moment in addressing the affordable housing crisis. The implementation of Tenant Bills of Rights and initiatives to protect vulnerable renters demonstrates a growing commitment to creating more equitable housing opportunities for all.

As we navigate these changes, it is imperative to keep the health and well-being of low-income families at the forefront of policy decisions. By embracing a comprehensive approach that combines fair tenant protections, increased public and private sector collaboration, and proactive solutions to address the shortage of affordable housing, we can establish a brighter and more secure future for communities nationwide.

Stay educated on other communities impacted by food insecurity, such as the LGBTQ+ community, LatinX communities, and women.