Opinion: Many mission-based landlords are at a breaking point
By
every
metric,
the
nation’s
affordable
housing
crisis
has
reached
unprecedented
heights.
A
record-high
22.4
million
renter
households
are
cost
burdened,
meaning
they
spend
at
least
30%
of
household
income
on
housing
and
utilities,
and
we
are
short
7.3
million
rental
homes
that
are
affordable
and
available
to
renters
with
extremely
low
incomes.
Meanwhile,
the
number
of
households
who
qualify
for
rental
assistance
continues
to
rise,
even
as
funding
for
the
crucial
subsidy
remains
relatively
fixed
as
do
the
number
of
people
experiencing
homelessness.
While
renters
clearly
suffer
most
from
the
lack
of
affordable
housing,
the
crisis
has
taken
a
toll
on
property
owners
too. The
pandemic
hangover,
which
has
left
many
tenants
straining
to
make
rent,
translates
to
lower
rent
collections,
and
in
turn
less
cash
flow,
for
owners.
Rising
operating
costs
add
to
the
pressure.
Insurance
premiums
are
up
27.7%
in
the
year
ending
January
2024
and
129%
since
2018,
according
to
Yardi.
Labor
costs
for
property
management
have
increased
nearly
50%
in
some
markets,
and
security
needs
and
costs
have
risen,
too.
At
many
affordable
housing
properties,
expenses
exceed
revenues
and
owners
are
now
forced
to
feed
budgets
to
cover
costs.
At
the
same
time,
the
nation’s
affordable
housing
stock
is
aging
and
desperately
needs
investment.
High
interest
rates
and
inflation
mean
the
cost
of
reinvesting
in
properties
is
expensive.
Add
to
that
constrained
public
resources
(from
lower
property
tax
collections
on
struggling
office
buildings)
and
competing
priorities,
and
housing
owners
are
struggling
to
maintain
properties,
make
payroll
and
remain
in
business.
The
financial
pain
is
especially
acute
for
mission-based
housing
owners.
Largely
nonprofits,
mission-based
landlords
provide
affordable
housing
as
a
tool
for
systemic
change,
including
advancing
racial
equity,
reducing
economic
disparities,
and
strengthening
community
resiliency.
Many
of
their
development
projects
require
more
patience
and
long-term
commitment
than
other
developers
are
willing
to
undertake.
For
example,
the
multiyear
redevelopment
of
the
Woodlawn
neighborhood
in
Chicago
simultaneously
builds
homes
and
revitalizes
a
neighborhood
through
job
creation,
animated
commercial
corridors,
access
to
quality
schools
and
childcare
and
community
engagement.
Mission-based
owners
also
offer
tenant
services
such
as
meal
deliveries,
after
school
tutoring,
job
placement
counseling,
and
digital
literacy
training.
Most
importantly,
mission-based
landlords
are
committed
to
keep
residents
housed.
In
lieu
of
ill-conceived
measures
like
eviction
moratoria,
which
can
ultimately
harm
the
quality
and
availability
of
housing,
many
mission-based
owners
practice
eviction
diversion
through
payment
plans
and
help
for
tenants
to
access
rental
assistance.
Arguably,
the
best
circumstance
for
any
renter
is
to
live
at
the
property
of
a
mission-based
owner
who
has
their
best
interests
at
heart.
The
properties
of
mission-based
housing
owners
run
on
even
thinner
margins
than
affordable
housing
writ
large.
As
a
result,
even
when
these
organizations
have
large
portfolios
and
balance
sheets,
they’re
often
cash
poor
from
the
high
cost
of
impactful
services.
A
seemingly
easy
solution
would
be
to
sell
properties.
The
real
estate
market
remains
relatively
strong
and
many
of
these
properties
are
in
metro
areas
where
developable
land
is
in
short
supply.
But
the
value
derives
largely
from
the
opportunity
for
potential
buyers
to
convert
these
much-needed
affordable
units
to
market
rate.
Given
the
already-enormous
shortage
of
affordable
housing,
it
would
be
shameful
and
counterproductive
to
lose
these
units.
Which
is
not
to
say
that
mission-oriented
property
owners
want
sympathy.
This
isn’t
a
question
of
pity
but
rather
one
of
resources.
When
times
are
tough,
high
mission
work
that
creates
flourishing,
inclusive
communities
is
more
important
than
ever
and
calls
for
extra
subsidy
and
flexibility.
It
can
be
done.
Last
year,
for
example,
the
Minnesota
legislature
earmarked
$50
million
in
its
housing
legislation
for
qualifying
nonprofit
affordable
housing
owners
who
are
experiencing
economic
hardship.
The
program
recognizes
that
fewer
mission-based
owners
means
worsening
an
already
devastating
housing
crisis.
In
addition,
dedicated
sources
to
help
operate,
maintain
and
repair
existing
housing
are
needed
to
address
deteriorating
property
conditions.
The
capital
markets
can
help
too.
Flexibility
in
accessing
a
property’s
reserves
and
commonsense
approaches
to
reporting
and
willingness
to
partner
with
borrowers
can
alleviate
the
pain.
Rightsizing
financing
terms
would
help
to
ensure
that
these
vital
properties
don’t
crumble
under
the
weight
of
debt
service.
By
shoring
up
the
health
of
mission-based
landlords,
policymakers
and
financiers
can
preserve
a
crucial
portion
of
the
nation’s
shrinking
affordable
housing
stock
and
support
critical,
aligned
partners
in
creating
thriving
communities
over
the
long
run.
Priya
Jayachandran
is
the
CEO
of
the
National
Housing
Trust,
a
member
of
the
Underserved
Mortgage
Markets
Coalition
(UMMC). Jim
Gray
is
a
Senior
Fellow
at
the
Lincoln
Institute
of
Land
Policy,
which
convenes
the
UMMC.
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