according to U.S. Census Bureauapproximately 42% of moves in 2022 will be for housing-related reasons. Of these, 7.7% moved specifically to find more affordable housing. And the most recent one USA Today poll found that 77% of U.S. households cannot afford a home with a median price of $495,750.
All of this means the need for affordable housing is greater than ever. Although many people think this means Section 8 subsidized housing, this is not the case. middle class Americans—teachers, essential workers, and government employees—can no longer afford to live in expensive cities.
this USA Today The report found that housing prices remain affordable in many parts of the Midwest; in major coastal centers, especially California, housing is out of reach even for middle-class workers with relatively high incomes.
Riaz Capital Case
Riaz Taplin Riaz Capital was an early adopter of the workforce housing concept and saw the writing on the wall about a decade ago.
Born into a San Francisco real estate family that specialized in managing multifamily properties, Taplin initially went in a different direction than the family business. After graduating from the London School of Economics, he focused on flipping luxury properties — a business model that ended abruptly during the financial crisis of 2008.
One of his business models is to use investor money to buy large single-family homes or small multi-family homes and then renovate them so that every room has a bathroom so it doesn’t interfere with zoning. He then rents these properties to middle-class workers looking for stylish yet affordable accommodation in the city. this Business scale continues to expandFrom 2011 to 2016, the number of tenants increased from 80 to 800, with 945 units transacted between 2014 and 2016.
Today, Riaz Capital owns and operates approximately 3,600 units and has 2,000 units or homes in the pipeline. Of the total, approximately 3,000 ready Labor housing, mostly in Auckland and some in San Diego.
“We’re focused on solving the problem of ‘how to place single-income professionals in an urban environment,’” Taplin told BiggerPockets. “Because the number of single-income households has increased significantly over the past 25 years, housing stock has not kept pace with the needs of this group.”
Make workforce housing recognized and accepted by Freddie Mac and Fannie Mae
Taplin’s instincts proved prescient, making him one of the Bay Area’s most successful workforce housing developers, with a focus on Oakland.
Taplin said:
“What I’m most proud of is that our design was nothing more than something drawn on the back of a napkin in 2018, and as of today, we’ve built 500 units of this type. We had the city give us building permits and the banks gave us We build loans, get investors to give us money, we provide homes for people and make them happy residents today. fully accepted This sub-asset class falls under the umbrella of multifamily housing, which is a recognized form of housing and allows Fannie Mae and Freddie Mac to secure loans against them as if they were typical homes. Multifamily housing unit, With the highest affordable discounts. In other words, we went from napkin to full market acceptance in eight years.
COVID-19 Challenges
Taplin, who Already well established Speaking to the Bay Area’s affluent tech community, he explained how he funds his ventures: “We work with investors who take a long-term approach to owning assets. We consider the entire life cycle of the asset and can optimize operations on the front end and Cost of capital. We also have capital partners who think the same way.
Typically, this means having investors finance the purchase and renovation of the project, and then Taplin refinances it, making the investors whole, factoring in the profits before recycling the cash into other businesses.
The biggest challenge facing Taplin’s business is the COVID-19 pandemic and California’s massive exodus. “Mass immigration from gateway markets, which is the Bay Area, has severely damaged our housing ecosystem, but nothing is more serious than a fundamental breakdown in the functioning of government,” he said. “Ultimately, when you build something like housing infrastructure, your partner is the local municipality or jurisdiction in You work. In all partnerships, whether marriage, friendship, or business, you must be able to trust your partner. Fundamentally, as a real estate developer in the Bay Area very difficult Trust our partners, the local government.
Taplin cited a lack of cleanliness and order and an increase in homelessness as specific problems: “The collapse of government functions has led to a domino effect, making construction more difficult and making it more difficult to coordinate and solve problems between agencies. Difficulty, fundamentally making the experience for our residents worse.
Continued need for workforce housing
Still, as cities finally show signs of recovery from COVID-19 and companies ask workers to return to offices, Taplin believes demand for workforce housing will increase as urban centers grapple with the cost of living.
“At the very least, we’re going to be regressing to the mean, where the rapid suburban growth of the last four years is probably going to slow down,” Taplin said. “Young people often want to start their post-school lives in urban areas, where they may contribute to the city’s faster growth in the coming years. Secondly, it is important to remember that the large-scale immigration of the past four years may represent emigration over the past decade.
With this in mind, he believes cultivating affordable housing mixes in major cities, perhaps in addition to New York Due to its saturation and competition, as a viable and sustainable business model for years to come.
“Now is the time to reinvest in these gateway markets that were thought to decline as they return to growth mode,” Taplin said. “For example, San Francisco County is now the fastest growing in California on a percentage basis. counties, California’s population has increased over the past year, but that’s still not the national narrative in those two places.”
New York City’s Section 8 program submits 7,400 pieces of content per hour
On the opposite coast, New York City recently reopened its Section 8 housing program after discontinuing it 15 years ago, demonstrating the urgent need for affordable housing.
Nearly a quarter of a million low-income New Yorkers use vouchers to rent apartments on the private market. Under the scheme, people spend 30% of their income on rent, while the government pays the rest.
when Application has been reopenedthe city received 7,400 submissions per hourmore than twice the volume of the final landing city Modification of Part 8 Waiting List.
according to new york timesciting analysis by the New York University Furman Centerexist In 2018, more than 70% of families with children could find an apartment to rent with a voucher within a year, but by 2022, this number will be 58%. exist 2023, The rental vacancy rate is 1.4%, the lowest level in more than 50 years. For cheaper apartments, interest rates are even lower.
“The data is clear: The demand for housing in our city far exceeds our ability to build housing,” Mayor Eric Adams said in a statement Publish the numbers. “New Yorkers need our help, and they need it now.”
Matthew Murphy, executive director of the Furman Center era: “Even with this assistance, finding housing in New York is difficult. On top of that, we know that voucher holders face discrimination.
$30 billion for government’s housing choice voucher program
The government has invest money More affordable housing is needed. In May, HUD announced US$30 billion in contract renewal funds Housing Choice Voucher Program (HCV). This funding will help the Public Housing Authority (PHA) continue to provide assistance to families and individuals in need of affordable housing.
Housing vouchers help more than 2.3 million families in need of housing, including families with children, seniors, veterans and people with disabilities, making them the most effective intervention to reduce homelessness and housing instability.
House prices have at least gone up 60% in the past ten yearsAdjusted for inflation, one in four renters (about 12 million households) spends more than half of their income on housing. In recent months, There are multiple housing initiatives Aiming to lower housing costs for Democrats, e.g. Elizabeth Warren and Biden administration,and ADU usage Some of the most expensive cities in the country allow this.
Interestingly, however, Republican-led red states Generally speaking, the cost of living is lower While the housing crisis is one of the issues worth noting and both parties are working together to find solutions, both parties are depriving their respective cities of housing supply. NIMBY law.
final thoughts
If aspiring landlords want an endless list of qualified tenants, then providing affordable housing is a no-brainer. For investors concerned about government oversight, especially the inspections that go into providing Section 8 housing, workforce housing aimed at the employed middle class in urban areas may be a more viable option. Renting a stylishly furnished apartment by the room to qualified tenants was once frowned upon, but it can help landlords solve the problem cash flow Own expensive real estate while helping tenants find a cost-effective, comfortable place to live – a win-win.
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