The Rent Revolution, Housing Policy, and the Market

After many years in which downtown, urban spaces were the brightest spot in the metro-area, focus has shifted to the suburbs. But how much has the suburban apartment market grown, and where is this growth the strongest? And what exactly are the technical requirements for to qualify as a suburb? Apartment List puts some data behind these trends (well, not that last question–that last question gets some help from the Harvard Joint Center for Housing Studies):

The New York Times: “The Rent Revolution Is Coming” – https://www.nytimes.com/2022/10/15/business/economy/rent-tenant-activism.html

• For the past several weeks, we have been discussing some of the reporting from major news organizations on high rent prices, and we’ve mentioned the differences between the categories of affordable housing and market-rate apartments. We may have explained these differences in pieces, but I think it’s worth laying it all out right here.

• Market-rate apartments, or market-rate housing, has a price determined by the market. This category of housing is the bulk of what we cover on the Gray Report.
• Affordable housing refers to housing (or apartments) with a price that is below the market rate. Affordable housing is supported and subsidized through the government and non-profit organizations. 
  • Builders and investors in affordable housing often receive lower rates on loans and/or other support, but they have to abide by a greater amount of regulations that ensure that lower-income individuals and families can afford living there and are not inappropriately turned away by a landlord.
  • Additionally, the income of renters needs to fall below a certain threshold to qualify for affordable housing.

• A lot of times, when we read about the affordable housing crisis and how it’s playing out in the apartment market, a significant portion of the testimonials from individuals and the larger-scale effects on groups fall within the affordable housing category. Affordable housing already has rent prices that are regulated by the government, and sometimes, reporting on the housing crisis will call for government regulation and support that is already there and focused on helping the exact groups of people that the reporting wants to help. This is, in effect, a difference of degree and not of kind, but it’s not usually framed that way. Instead of calling for new or additional regulations, this reporting 
• “Pairing aggressive protests with traditional lobbying, the group exploded onto the political scene during the pandemic and has since become instrumental in passing tenant-friendly laws like an ordinance that gives renters a lawyer during eviction proceedings.”
  • This seems pretty sensible to me, granting a lawyer to anyone going through eviction proceedings.
• “Covid-19 and inflation have tipped smaller cities into an affordability crisis. This has opened the aperture for policies once deemed politically impossible, in a wider range of markets.”
  • This seems… They’re talking about rent control, right?
  • Oh phew, they didn’t say “rent control,” they said “rent caps”! It’s just a little hat you wear in an apartment, right?
• “Need has grown faster than resources, making housing policy a prism through which a stealth conflict between the middle class and the truly poor is filtered.”
  • This, again, seems to veer towards conflating market-rate housing with affordable housing.
• Credit to the reporter for referencing the fabled eviction tsunami and explaining that it never materialized, but again the “large swaths of renters” invoked in this article might largely fall within the affordable housing category.
  • There is the possibility that affordable housing does not meet appropriate standards, or that people who qualify for affordable housing are not receiving the support they need, but this is all within the wheelhouse of current government programs.
• I did like the levity here: A target of protestors, “Judge J. Dale Youngs, . . .  said in an interview that at one point the group spray-painted ‘FU’ onto a flagstone path in his yard. He added that he did not know if ‘FU’ was the completed thought or if the vandal was interrupted before the message could be finished.” Maybe they were going to spell out “Fun Judge”?
• This article seems a lot more focused on the lives and experiences of those advocating for a solution to the affordable housing crisis in Kansas City with less insight on the potential causes of the problem or ways to address it. There is a part in this article where an affordable housing activist stresses the importance of data as a persuasive tool to advance their cause, but there is not enough of this data in the article.
  • For instance, a passage saying that “even though Kansas City remains inexpensive compared with larger cities, it is spiraling into the same affordability problems as those places and is no more equipped to solve them,” leaves me wondering to what extent Kansas City is spiraling into the same affordability problems. It leaves me thinking about the Yardi Matrix data we covered last week showing that Kansas City has the lowest rent-to-income ratio of all the cities they covered. Yes, this is just data from one source, but one, it’s a pretty dang credible source, and two, it’s hard to see Kansas City going from lowest rent-to-income ratio to the spiraling affordability void they’re conjuring in the article.
  • At the same time, having a city with (relatively) low housing costs as the example of renter affordability issues does lend itself to the idea that unaffordability is more pervasive and widespread than expected.
• Agh! Why is it that the clearest perspective on this issue is found in the conversation with an apartment operator! Am I a capitalist pig?!?
  • “Eli Ungar, the founder of Mac Properties, which is based in Englewood, N.J., and owns about 9,000 apartments, including 2,000 in Kansas City, bluntly laid out the economics. The cost of development is now so high that the most reliable way to make money is by building apartments for tenants who regard the cost of rent as ‘a matter of curiosity.’
  • This leaves two groups behind.
  • The folks who think of themselves as middle class and are feeling increased worry and pressure as rents go up faster than incomes, and the people who are most vulnerable in our society and desperately need housing that no developer can provide without a massive subsidy,” Mr. Ungar said. ‘As a citizen, I would be entirely comfortable with my taxes being higher to provide well-maintained housing for those who can’t afford it. The question is how that is achieved, and market-rate developers are not unilaterally going to say, “I will reduce my income to achieve this goal.”’”
  • This last part is EXACTLY what I was thinking when I was describing how much of this feel within government supported affordable housing programs. If there is a problem of degree and affordable housing support needs to be increased, I should be okay with higher taxes to fund it. I should be. I should be. Look, maybe it’s one of those things where I’ll just take my lumps and accept it.
• I didn’t see anything new or novel in the comments, try as I might. But despite the murmurings and implications of rent control (“caps”), I think that the answer is tacitly acknowledged, at least by many in the government. We need to create the conditions that will encourage the development of additional affordable housing rather than looking at bandaid solutions to high rents that are too far downstream of the real issue to have a sustainable effect (in a capitalist system). That’s really the underlying point of the White House’s housing plan.