Promoting Innovation in Affordable Housing Concepts
The cost-of-living crisis is the latest issue compounding the housing crisis in the United States. After inflation, wages have largely stagnated. Growing demand for homes has outstripped supply. In some areas, developers have taken advantage of zoning laws and built luxury apartments instead of more affordable units.
Whatever the underlying causes ─ and there are plenty ─ affordable housing is a very real issue. The latest research from Pew Research Center has found that almost half of Americans now say that “the availability of affordable housing in their communities is a major problem”. Only a shade over 10% of people believe that the affordability of homes is not a problem in their locale.
The lack of affordable housing is not only a concern of low-income families, either. 47% of middle-income families and 42% of higher earners say that affordability is a major issue.
The conclusion is that we must find creative solutions to affordable housing to deliver affordable housing concepts. And we must do so fast.
The fallacy of raising wages and creating jobs
Many ideas to solve the housing crisis have been put forward. In the macroeconomic sense, potential solutions all come embedded with the potential to worsen the issue. Such ideas include creating more jobs and increasing the minimum wage. While both possible solutions would, on the face of it, increase family incomes, they are both fraught with risks. For example:
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More jobs may lead to both higher inflation and higher demand for new homes, pushing up costs for construction companies and increasing the costs to buy a home
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Raising the minimum wage could force many smaller companies to cut jobs, and work against the target of increasing a family’s income, while simultaneously increasing costs for home builders
The irrationality of cutting interest rates
Another economic idea that has been put forward is to cut interest rates. But we’ve tried this. We’ve had ultra-low interest rates for a decade. All this achieved was to make mortgages more affordable and increase demand. Consequently, the housing market has been in an unprecedented boom period since the subprime-led financial crisis and real estate collapse of 2007/8.
Furthermore, the elevated levels of mortgage debt that now exist in the United States risk imploding the real estate once more, should we enter a recession and jobs get destroyed.
Subsidizing rent is not a long-term solution
As the population continues to migrate to urban locations, we have seen many efforts made to make housing more affordable in our cities.
However, rather than tackle the underlying issues, governments have used solutions that do little more than paper over the cracks and at a cost to us all. Such solutions include rent subsidies and housing vouchers, and government-backed affordable rent developments.
All such solutions must be paid for, by taxpayers. Indeed, it could be argued that these solutions are the worst examples of short-term policy decision-making. They kick the can down the road, do nothing to tackle underlying costs, and will increase the cost to taxpayers for decades to come.
Ho much is this cost? As an example, The Center on Budget and Policy Priorities says that 5.2 million households in the United States used federal rental assistance in 2020 at a cost of almost $50 billion. And even with this level of aid, 40% of low-income families are either homeless or pay more than half their wages on rent.
And it’s getting worse. Median renter incomes have increased by 3% in real terms since 2001, while rents have increased by 15%. Federal assistance cannot keep pace.
So, how can we address a lack of affordable housing?
We believe that the only way to tackle the issue of affordability successfully is to take a multi-solution approach. We must consider areas such as:
Planning and zoning
Can state governments do more, encouraging mixed-use developments and relaxing planning and zoning regulations that restrict the land on which we can build? Should we encourage infill and redevelopment to make use of derelict industrial real estate? And where we do allow construction to take place, are we enabling a range of housing types to be built, making the best use of large and small lots? Are we flexible enough in zoning and subdivision requirements?
Public/private partnerships
Instead of using taxpayer money to continually fund housing subsidies, would that money not be better used to develop and enlarge our real estate stock? Should we focus more effort and funding on creating public/private partnerships to take advantage of existing landbanks, and work with community land trusts to free up land that could be used for development? What support can we provide to communities, to educate more effectively in home ownership?
Tax and funding
The complexity of fees and regulations has increased the cost of housing construction. Isn’t it time we sought to simplify this tax regime and decrease the burden of tax across the industry? How do we start? Should we offer more tax and fee waivers? Could we provide tax breaks for the donation of vacant lots on which we can build affordable housing? What part does the updating of infrastructure play in development decisions?
How we design and construct our homes
When we design and construct new homes, we must do so with greater regard for sustainability. We must consider what materials we use, how we treat construction sites, and how those homes will be used in the future.
It’s crucial that we build homes to be sustainable. Homes that use less of our natural resources, and consume less energy. Solutions that we know to work include:
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The use of modular homes that are built off-site and then transported to their destination
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The use of prefabricated materials and factory production lines
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The use of 3D printing technology
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Greening of homes
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Co-living apartment blocks
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Smart home technology
Working together for innovation in affordable housing
We’re not saying that federal and state subsidies should stop. We’re not saying that low-interest rates are not advantageous. We’re not saying that higher wages and more jobs are not goals we should pursue. However, we have tried all these things and they haven’t worked to halt or reverse the housing crisis. Indeed, the crisis of housing affordability has deepened.
We must be more innovative to deliver creative solutions that tackle the issues at all levels. Instead of treating the symptoms, we must find ways to tackle the cause:
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Federal and state governments must work together
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Communities should be involved in solution-finding
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Construction companies and architects must collaborate
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We must take positive decisions to improve the availability of development land
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We must use our land wisely
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We should design sustainable homes that are cheap to own and run
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We must use innovative technologies and methods to build faster, more sustainably, and at a lower cost
No one is saying this will be easy. But surely, the long-term benefits will be worth every ounce of combined effort we put in.
At ACB Consulting, we are committed to helping improve the communities in which we live, work, and play – including how they are conceived, designed and created. To leverage our experience in sustainable design and construction, contact ACB Consulting.