There is a severe lack of affordable housing. This housing shortage began after the 2008 financial crisis and has worsened during the pandemic, and now there are simply not enough homes. built to meet current needs. Inventories slowly rose in the second quarter, which was helpful, but adding more inventory alone won’t solve the problem.
The government plan helps create more affordable housing inventory and prevents large-scale investors from taking homes away from middle-income Americans.The White House released a March Budget These include plans to support Biden’s housing supply action plan.Generous tax credits and more for first-time homebuyers for Homeowners selling new homes be created Directly reward and inspire consumer action.
Incentives such as local grants, low-income housing tax credits, and proposed new community housing tax credits Can Financial incentives for developers and investors were able Guide these government programs and secure funding for their projects.
legislators made it clear extremely Low-income and affordable rental housing main Funding and legislative priorities. Again, if they get going, these could be useful moves to increase housing stock in certain categories, but what else? Gone?
Independent investors fall somewhere between institutional investors with more than 1,000 properties and nonprofits trying to support low-income communities through government programs. These local mom-and-pop solopreneurs and small business owners actively rehabilitate homes in their local communities, often taking over vacant, abandoned and distressed inventory that does not qualify for traditional financing, as well as projects that may be beyond the scope of traditional financing. Ordinary home buyers.
The independent investor acts as a housing provider. But do lawmakers know they exist? Or what impact will single-family investors bring affordable inventory back to the market for the average middle-income homebuyer?
Affordable housing legislation needs vote through, and the upcoming presidential election will divert and distract attention. But independent investors will move on. Continue to recover – flipping and renting can Have an exponential impact housing inventory small help.
Legislative factors affecting independent investors
Lawmakers do not recognize the role of independent investors
In the current real estate market, common narrative portrays independent investors as main The reasons for housing hoarding and subsequent price spikes are oversimplified, and a deeper understanding reveals a nuanced story.
Large investors and private equity firms World Health Organization Those who own more than 1,000 single-family homes represent only a small portion of total ownership. In fact, most institutional investors have been taking a wait-and-see attitude due to high financing costs and have changed their strategies. SFR players with ~3% SFR yes Buy Existing investment portfolio from smaller investors and focus more about build to rent space.
Yet the bill is as recent as Affordable Homes and Homeownership Protection Act Aiming Taxes real estate investors on each purchase of SFR.this bill definition Large investors and “mega” investors with 25 to 100 homes yes Someone with over 100 SFRs.These investors will pay a tax of 3-5% of the purchase price of each property, each tax year. 1% tax will be leveraged “Medium” investor with 15 properties.
this This is just one recent example that shows policymakers never seen it or Understood The role of independent investors as housing providers. Investors who rehabilitate and own rental properties are accustomed to being aware of existing and proposed legislation About Tenants Act, Squatters’ Rights and Landlords Act. Large institutional investors will only transfer About Priorities until the rental market makes sense for them economically reenter.
Independent investors, however, have been caught up in the mix to some extent, including in the headlines and negative talk about Wall Street taking over Main Street. Not only have they been criticized for competing with average homebuyers and pushing the market in the wrong direction, but they have never been viewed in a positive light for OK the work they do. A spotlight would be nice, even though they don’t ask for it.
State and local government barriers
to that moment Zoning, land use and building requirements are not the same in all states, nor are the numerous individual counties and cities. The federal government is encouraging local governments to re-evaluate outdated zoning and building restrictions to create opportunities for new construction and rehabilitation properties.
Local communities often have size and density restrictions or allow the construction of manufactured homes and accessory dwelling units. Legislative focus specifically on helping single-family investors could impact those investors’ ability to rehabilitate, add additional units and build more housing.
Incentives and grants designed by local governments for single-family investors can quickly increase inventory, Potential for radical change by independent investors Entire streets were filled with uninhabitable houses. For a single property, a new construction timeline could be 18 months, with the sale of existing stock simply an exchange of homes. Homenot a supplement.
Currently, independent investors must understand local legislation and anyone Seize the opportunities or avoid the pitfalls of zoning, land use and building restrictions. No matter what, there are nearly 15 million empty homes in the U.S.also The large number of aging homes owned by baby boomers requires main Renovate to make it habitable for a new buyer. These are the main items this independent Investors who can take home these properties market.
Mortgage Rate Questions
Mortgage interest rates will Obviously still a factor The entire real estate market in 2024 and beyond – no surprise here.In fact, headlines about mortgage rates Do What affects home buyers and sellers and causes them to take action or not take action is often due to fear.
Predictions at the start of the year were that the Fed would lower the federal funds rate at least once or twice during 2024, and so far, those plans appear to have come to fruition pushed out. this That means homebuyers and sellers who need to move are accepting mortgage rates, sales prices are rising and inventory remains tight.
The mortgage rate picture remains the same from last year to this year for investors who plan to continue rehabbing their homes and adding to their rental portfolios. Because they can obtain alternative capital or equity from other properties, the real mortgage rate can’t stop investor from doing their job. While this may deter some, they continue to add to their housing inventory while building new homes not much attention.
final thoughts
At New Western, we serve over 200,000 investors who purchase rehab properties through our marketplace. These are local, independent investors who can benefit from financing and help navigate complex regulations.
A November 2023 survey of nearly 1,300 New West investors revealed a positive outlook for 2024 and the potential impact on affordable housing stock. Here are some highlights:
- Expected growth: More than half of the investors surveyed are strongly optimistic about business growth in 2024.
- Acquisition plan: About 80% of investors have specific plans to purchase property, with the goal of purchasing one to five properties in 2024.
- Focus on properties that are vacant or uninhabitable: Most investors focus on properties that are vacant or uninhabitable.
- Pricing trends: Even though the target property required significant investment and renovations, 64% of investors reported being able to sell the property at or above asking price and within the budget of a moderate-income buyer.
While independent investors will continue to grow their businesses and rehabilitate uninhabitable properties in 2024, innovative policy measures can help support and expand their impact, particularly in creating affordable housing.
This article was reported by New Western Region
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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
