States turn to new legislation to remedy affordable housing issues
By Cody Porter and Jennifer Horton
Lingering fallout from the COVID-19 pandemic placed an immense economic burden on countless Americans. Since 2020, the housing market is one area experiencing the brunt of its weight, remaining in a volatile state due to significant reductions in jobs and wages.
Deemed at an “inflection point” by the Joint Center for Housing Studies of Harvard University, the homebuying market’s record 2021 was followed by increased interest rates in 2022 that helped slow purchases in a market lacking inventory. Due to limited supply, costs for homes and rentals alike continued to soar in unison with rising rates.
Those most directly impacted by the active shortage of affordable and available rental homes are extremely low-income households, which includes those with incomes at or below the poverty guideline, or 30% of their area median income, whichever is higher. There are just 36 affordable and available rental homes for every 100 low-income households — a deficit of 7 million homes nationwide. For extremely low-income renter households, 71% are severely cost burdened, meaning they spend more than half of their income on housing, making it more difficult to afford healthy food and health care.
ATTAINING AFFORDABILITY
In its February policy brief on housing prices and affordability, the Kem C. Gardner Policy Institute at the University of Utah noted that housing affordability comes in two forms that are not mutually exclusive: affordable housing and housing affordability.
Affordable housing refers to a specific type of housing, generally government-assisted rental housing targeted for very low to extremely low-income households. Housing affordability is a much broader term and refers to the general level of housing prices relative to the general level of household incomes. The term does not refer to any particular type of housing. The two concepts are not mutually exclusive or in conflict but are complementary with affordable housing being a subset of housing affordability.
— James A. Wood, Kem C. Gardner Policy Institute at the University of Utah
In 2022, a person working full-time in the U.S. needed to earn $25.82 an hour on average just to rent — not purchase — a modest, two-bedroom home. That hourly wage is $18.57 higher than the $7.25 federal minimum wage. In some states, the two-bedroom housing wage is even higher— up to more than $40 an hour. The average worker earning minimum wage would need to work almost 96 hours per week to afford a two-bedroom rental at the national average fair market rent of $1,324.
With the rapid increase in home and rent prices over the last several years, millions of low-income renters struggled to afford their rent even before the pandemic. The economic impacts of COVID-19 exacerbated the problem even further as low-wage workers lost income. While temporary eviction moratoriums and Treasury Emergency Rental Assistance programs kept millions of disadvantaged renters housed during the pandemic, as these programs end, the need for affordable housing for the lowest-income renters will not.
Homes suited for low- or middle-income earners to rent or purchase have been quickly consumed by investors in recent years for rental income or for quickly upgraded resells. During 2022’s first quarter, investors accounted for 28% of single-family home purchases, which is 9% higher than the year prior, according to CoreLogic data cited by The Joint Center for Housing Studies in its 2022 housing report.
More densely populated areas, such as Atlanta, Los Angeles, Phoenix and San Jose, and were favored by investors in recent years due to higher home values compared to those in smaller cities. This factor, combined with the workforce’s ability to work remotely, promoted substantial population growth from 2020-22 in the likes of Idaho, Montana and Utah. Axios reported Idaho’s population increase of nearly 4.9% as the most for any state during the two-year span, while Utah came in just under 3%.
Utah, ranking fourth overall in growth from 2020-22, experienced similar increases from 2020-21 by adding 56,000 new residents, or 1.7%. Much of the state’s continued growth can be attributed to its lure as an employment hub, including in the tech space. The Milken Institute’s 2023 “Best-Performing Cities” featured many impacted by Utah’s employment boom, including Provo-Orem — its best-performing city for a third consecutive year — in addition to Logan and St. George as viable options among smaller cities.
A common theme for the states without dense populations has been determining how to best offer sufficient housing. Plagued by challenges stemming from the pandemic, funding for new projects has been difficult to obtain. When available, new housing projects are marred by issues associated with zoning mandates.
Former Utah Sen. Wayne Niederhauser, a real estate broker by trade, was involved in many affordable housing efforts prior to assuming his current role as Utah homeless coordinator in the Office of Homeless Services. While proud of his state’s ability to attract new employment opportunities, he said it doesn’t come without “a little caveat.”
“With all of these new, high-paying jobs there’s more money chasing a limited supply of housing,” Niederhauser said. “Our population could not have sustained such employment growth, so we’ve had huge in-migration from places like California where real estate values are higher. You’ve got all this equity coming in from a state with higher property values chasing after a limited housing supply, and it only multiplies our problem.”
In October 2021, The University of Utah Kem C. Gardner Policy Institute revealed in its “State of the State’s Housing Market” report that more than half of the state households could not afford median-priced homes. In the time since, prices have only increased.
“Our children and grandchildren are priced out at this point unless you’re making a lot of money — almost six figures at this point,” Niederhauser said. “We’ve had unprecedented home appreciation, and we have got great economy, but that does price out social workers, case managers, firefighters, police officers and teachers. Compared to the national level, [Utah] ranks near the top in appreciation and that’s why it’s different here.”
AVENUES FOR RESOLUTION
In Maine, where the population grew quicker from 2020-21 than its previous 10-year average, state leaders have remained active in identifying avenues for additional housing.
It’s quite possible the state has even underproduced housing for quite some time, according to Ryan Fecteau, senior advisor of community development and strategic initiatives for the Maine Governor’s Office of Policy Innovation and the Future. However, as Fecteau noted, the issue of affordability and availability has only emerged in the past few years due to in-migration.
“We’ve had net migration of around 37,000 people. For most states, that might not sound like a lot, but for a state of 1.3 million people that is a pretty significant number of individuals moving here,” Fecteau said. “The vast majority of the people moving here as part of the in-migration have been under age 45. So, we’re not talking about retirees calling Maine home; we’re talking about working-age folks. We now have this real gridlock, this stalemate, in our housing sector, where older adults might [be prepared to] downsize but [unsure if ] they’re going to be able to find another housing opportunity.”
Maine Gov. Janet Mills appointed Fecteau to his current role in January as part of a string of efforts to address the state’s pressing need for housing. Maine’s House Speaker from 2020-22, Fecteau sponsored many bills on housing and community development. Among them was LD 1645, which created the Maine Affordable Housing Tax Credit that — to date — remains the state’s largest investment in affordable housing.
Maine’s Affordable Housing Tax Credit is an eight-year program granted $10 million per year, including shares for senior and rural housing. As a result, the state’s investment is matched with federal low-income housing tax credit dollars. To qualify for the program, individuals must earn below 60% of the area’s median income and monthly rent cannot exceed 30% of an individual’s monthly income.
“We’re very lucky that here in our state, we have the leadership of the governor, legislature and lawmakers on both sides of the aisle,” Fecteau said. “This is probably one of those rare issues in today’s politics where you have members on both sides of the aisle resoundingly in favor of tackling this problem.”
— Ryan Fecteau, senior advisor of community development and strategic initiatives for the Maine Governor’s Office of Policy Innovation and the Future
Fecteau reported the completion of 192 housing units since LD 1645 was enacted, with an additional 701 units in the works. The governor’s budget includes an additional $35 million for the tax credit that could lead to the development of 350 more units.
Additional housing initiatives in Maine include the Rural Affordable Rental Program and protecting United States Department of Agriculture Section 515 properties — the latter of which employs the use of the state’s tax credit. Mills has also proposed $10 million for a new Innovation Fund for Attainable Housing, expediting the production of affordable housing for qualified renters and homebuyers.
EQUITY FOR THE “MISSING MIDDLE”
Fecteau’s other prominent work came with 2022’s enactment of LD 2003, advancing affordable housing and housing-friendly zoning and land use regulations. The legislation resulted in the creation of a local zoning and land use commission that delivered recommendations to the governor’s office in December 2021 allowing, “Maine property owners to build accessory dwelling units in residential areas and up to two units on a lot zoned for single-family housing.”
Although it could possibly aid growing housing issues, the topic of zoning is a highly debated one. In February, NPR reported on the discussion to end single-family zoning mandates in Arlington, Virginia, thus paving the way for new housing opportunities. As part of Arlington’s “missing middle” housing reform plan, developers could construct multiple units on a single-family lot, including duplexes up to six-unit buildings.
Arlington, much like Minneapolis and the states of Maine, California, Oregon and Washington before it, looked to capitalize on an opportunity to do more than increase affordable housing — it looked to re-establish racial equity in areas previously segregated by single-family zoning laws, as well as limit the need for commuting.
The “missing middle” plan, which was ultimately passed in March, included opposition who believed that not even increased community density would improve pricing. Other local Arlington homeowners were also concerned about potential parking issues, high taxes and flooding.
Public outcry led to city commissioners in Gainesville, Florida, reversing course on their decision to end single-family zoning just months after adopting the plan. Gainesville was originally the first city to adopt the plan after Florida Statute 163.31771 passed in 2021.
The following examples of state adopted affordable housing legislation include that plan and more:
California Assembly Bill 2162 (2018) encourages the production of supportive housing statewide by mandating streamlined and expedited approval for such projects and the elimination of minimum parking requirements for developments located within half a mile of public transit.
Florida Statute 163.31771 allows localities with a shortage of affordable rental housing to adopt an ordinance permitting accessory dwelling units in single-family residential areas to increase the availability of affordable housing for low and moderate-income individuals.
Massachusetts State Statute 40B enables local zoning boards of appeals to approve affordable housing developments under flexible rules if at least 20-25% of the units have long-term affordability restrictions.
Oregon HB 2001 (2019) implemented state-level legalization of “missing middle” housing. It expands the areas across the state available for duplex construction.
Utah SB 153 (2023) establishes the Redevelopment Matching Grant Program under which local governments can qualify if they have an approved development application that allows for “the creation of new or additional affordable housing units.”
“People achieve economic prosperity through homeownership. In some cases, being a homeowner is going to be what sets someone up for economic security in their later years,” Fecteau said. “Obviously, we want folks to take every initiative they can to save and plan for retirement, but homeownership is a very critical means to economic security and prosperity.”
