by Wendy Simpson
While the coronavirus pandemic and civil unrest command the country’s attention, we also need to keep a close eye on the economic impact of the health and social crises on the multifamily industry moving forward.
The combination of a global pandemic and the social justice reform movement happening in our country right now will only bring more attention to the affordable housing crisis. And it’s not just attention that we need to be prepared for. Demand for affordable housing has already increased.
Unemployed and Impacted Renters Driving Demand
The demand for affordable housing spiked when Covid-19 hit, as millions of Americans lost their jobs with little or no notice. Many displaced workers continue to tap what little savings they have to endure the time without work and still make their rent payments. As the country and economy slowly climb their way back, those renters will be looking to recoup and replace those reserve funds.
As multifamily developers push full steam ahead on various projects throughout the country, many renters wait with anticipation to see whether some of these homes will be designated affordable or priced below market rate. By designating a number of units at each community as affordable, even more than required by local jurisdictions, multifamily has an opportunity to position itself as a solution to the affordable housing crisis.
Mixed Income Still Drives Revenue
The beauty of mixed income housing is that it still benefits from market rate units. With revenues driven largely by market-rate rentals, budgets can be built similarly to those communities without affordable units.
For mixed-income developers, market rate units generate revenue margins that still allow development projects to pencil out. These communities generate a high enough NOI to invest in more innovative amenity spaces, convenience-based amenities and both resident- and property management-facing technologies, while at the same time making housing more affordable.
For residents, mixed-income properties provide many of the same amenities and prop tech features deployed at above-market-rate communities. Unlike strictly affordable housing communities, which often lack the amenity spaces, as well as the in-home options or tech integrations found elsewhere, mixed-income properties typically mirror the options at market-rate rivals.
Mixed Income is a Catalyst for Developers
For any new development, a crucial component of success is developing a strong relationship with the city, county and most of all local community neighbors. But one common obstacle to building this relationship is the negative reaction to perceived gentrification. By providing mixed-income housing, developers typically avoid community resistance. With stronger community relationships, mixed-income properties can act as a catalyst for additional development projects down the road.
The Solution for Today and Tomorrow
The Covid-19 pandemic may have temporarily drawn the apartment industry’s eyes away from the nation’s affordable housing emergency, but the health crisis has only amplified the issue.
Thankfully, multifamily is working toward meeting the demand for affordable housing when considering the number of developments currently planned. Mixed-income properties have shown the potential to provide housing answers not only in response to economic downturn but also to stave off similar issues in the future. The economic implications of the health crisis should spur developers to take a second look at mixed-income housing and the role it plays within the rental market.