How Will COVID-19 Impact Affordable Housing?
The era of COVID-19 will shift the landscape of nearly every industry for years to come; this is especially true for affordable housing. Here are four predictions on how the affordable space will be affected by the new COVID-19 world, for better or worse.
Demand for Affordable Housing Will Go (Way) Up
As of this writing, approximately 22MM people filed for unemployment in just the past four weeks here in the U.S. Millions of households that have been getting by in the middle class are now jobless and suddenly qualify for affordable housing. They will soon be looking to downsize to cheaper housing in preparation for the coming recession. In fact, The National Low Income Housing Coalition estimates that 10 million low-income US households were paying 50% or more of their income toward rent – and therefore at higher risk of experiencing homelessness – before coronavirus. Now, they estimate 1.5 million more could soon be in the same position.
In a world where two million families are already waiting for affordable units to become available, there will be a massive wave of applicants, creating an even greater demand glut, and in turn, a supply crisis.
Mass Evictions and Turnover (Without More Government Intervention)
As part of the $2.2T CARES stimulus bill, there is a 120 day moratorium on any and all affordable housing tenant evictions. In addition, there is now a nationwide moratorium on foreclosures of homes backed by federal agencies. Owners that accept forbearance assistance must refrain from evicting their tenants as well.
While this is good news for renters, the longer term outlook remains bleak.
Consider that 40% of Americans cannot afford a $400 surprise expense. Even with the moratorium and $1,200 rebate per person, most affordable tenants that have lost their jobs will barely be able to pay for one month of rent. Indeed, average rent delinquency increased 6% for April; not horrible but could get worse quickly.
So, the big question is what will happen after the 120 day moratorium is lifted at the end of July?
Unless the government extends the moratorium and offers meaningful subsidies to owners, property managers will be forced to turn over delinquent tenants so they can meet their mortgage obligation. The most draconian scenario is mass tenant eviction of the likely 10-15% of households that can no longer afford their rent.
Affordable Housing Development Boom in the Medium Term
A silver lining that isn’t being widely talked about just yet is the potential for a dramatic increase in affordable housing development projects in the medium term.
There are two significant tailwinds that contribute to this prediction:
Developers have stopped construction on new affordable housing developments across the country, even though the work has been deemed an essential service, restricting supply.
There is a reasonable likelihood of federally supported expansion of HUD and tax credit programs to meet the ensuing affordable housing demand that results from the impending economic downturn.
Property Operations Will Go Electronic, and Stay There
The affordable housing industry is notoriously old school and has always had an aversion to modern technology adoption...until now.
Owners and property managers are suddenly racing to find tech solutions that will enable them to take their operations online and reduce unnecessary person to person contact. What was once a low priority “to-do” has turned into a mission critical initiative.
Managers are looking to take as much of their workflow online as possible. A few hotspots include: apartment tours, applications submission, and re-certifications.
A few creative tools we see property managers implementing for the above include Zoom video tours and customized digital applications that integrate directly into their websites.
The silver lining here again is that after the Covid-19 crisis is settled, these workflow innovations should be here to stay. Here’s why:
Savvy business leaders will not be caught off guard twice. A general attitude of preparedness will compel managers to not only maintain, but embrace, their new operational redundancies.
Tenant expectations will evolve to expect more, as they should.
Managers will see and appreciate the convenience factor that software brings to the table in easing administrative burden.
Most importantly, all stakeholders will find that technology improves access to housing opportunities that will supplement, not replace, the paper based world that is affordable housing.
Subscribe to our newsletter for more insights and to stay informed on all things Affordable Housing!