Affordable Stock Needs Attention

Virginia’s affordable housing supply faces large shortfall.

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6 minute read

Society often becomes acutely aware of the value of affordable housing through its absence. The problems that accompany a shortage of affordable housing affect far more people than just the residents who cannot find an apartment home. Without it, businesses struggle to hire, economic development stagnates and existing residents get fewer and progressively less appetizing options from which to choose where they live, work and raise their families. Young people grow up and leave their community rather than stay, draining valuable talent and potential from a community and essentially returning the whole vicious cycle back to square one.

To avoid this, Virginia must jumpstart the construction of a large number of apartments as soon as possible at a variety of price points. That represents a huge challenge politically, financially and socially. Even the most basic conversations about affordable housing involve ambiguous terminology, fraught local politics and labyrinthine bureaucratic process— starting with how “affordable housing” is defined. 

“Affordable” to Whom?
One of the first questions to consider when discussing affordable housing is also somewhat complicated to answer. The prevailing metric by which policy determines whether housing is “affordable” is Area Median Income (AMI). Like the name states, AMI is an average of reported wages within a given area, adjusting for household size, calculated annually by the U.S. Department of Housing and Urban Development (HUD). The number varies widely based on area and adjusts for household size.

Federal guidelines set by HUD delineate those who make less than 80% of the AMI in a given area “low income,” and anyone who makes less than 50% of the AMI “very low income.” That distinction is important because it qualifies a person for federal housing subsidies like participation in the Section 8 Housing Choice Voucher Program.

Like anything else, housing is subject to market forces. Unfortunately, in the modern history of the United States, we have evolved such a deep shortage of rental housing relative to demand that supply cannot effectively take pressure off demand. That means that “affordable,” has drifted further away from the reality in peoples’ wallets over the course of time. That has led to a concerning 44% of renter households in Virginia being “cost-burdened,” according to the Commonwealth’s research arm: The Joint Legislative Audit and Review Council (JLARC).

There is shrinkingly little argument about whether new housing development is needed or is even at the right price points.

Where Does Affordable Housing Come From?
Many of the apartments that rent at or below an area’s Fair Market Rent (FMR), another annual calculated number released by HUD, exist in many new housing developments are the product of federal programs like the Low-Income and Middle-Income Housing Tax Credit (LIHTC and MIHTC, respectively). In return for tax credits distributed by a state housing finance agency, a given developer will set aside a certain percentage of the units in a planned community at a certain price point relative to AMI. These tax credit programs are what makes new, purpose-built “affordable housing” construction financially possible.

With these programs, housing developers have few, if any, ways to construct any large-scale market-rate housing that would look affordable to an applicant at or below AMI. The costs of labor, materials, time and government bureaucracy make investing in new construction of anything but high-end housing very difficult without LIHTC or MIHTC to support it. Market-rate construction, even though it is aimed at a higher income segment of the market, also has an extremely important role to play in creating a local environment where housing is available at a variety of price points.

That brings us to naturally occurring affordable housing, or “NOAH.” These are older construction communities that have often been through one or two rounds of rehabilitation and updating. They usually represent most of a locality’s housing options at or below FMR. NOAH is the underpinning of the need to open the taps of housing construction right now. NOAH is comprised of communities that were initially built for the luxury market but have been in operation long enough to lose that market to newer construction. 

Despite the name, NOAH does not naturally renew, and it cannot be purpose-built on a two- year timeline. NOAH is a resource that takes decades to build up; it requires a large degree of construction at the top of the market to inspire long-term competition and drive prices down sustainably. This answer is frustrating to local government officials and long-time community residents who are looking for a fast solution to the slowly evolved problem of housing affordability.

Solving Affordable Challenges
Though there is nothing controversial about the understanding that every person needs shelter, past that point, politics get involved. Housing has to be located somewhere, preferably somewhere with road access and the ability to connect to municipal utilities. It will come as no surprise that there are usually already some people in those areas who will have questions and concerns about what that housing construction means. There will even be a number of people who refuse to support new housing construction no matter how clearly it is needed. Community opposition is one of the most pervasive obstacles to housing construction of any kind, but specifically housing that is envisioned as affordable to a broad spectrum of the population.

Because most of the decisions that make building new housing easy or difficult revolve around elected bodies of local government, separating it from politics is impossible. Voters who oppose new housing construction tend to view it as a threat rather than looking at the value that it will provide for them as part of the community. When people feel threatened, they often react negatively and with force.

This pushback usually takes the form of ominous predictions that allowing “those people” into the neighborhood will make “us” less safe or will overstress utility infrastructure or will crash their property values; outcomes that rarely ever come to pass butt excite an emotional response. This drives a labyrinth of bureaucratic process that all must be wrapped up into the cost of the project and ultimately passed on to the renter in the form of higher rents. This “Not In My Backyard” or “NIMBY” activism at the local level can be a brick wall to housing development at an affordable price point, and confronting it head on is critical if we are serious about expanding it.

According to that same JLARC study, Virginia is short over 200,000 “affordable” rental units, and JLARC are not alone. The National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC) anticipate that Virginia will need to construct more than 7,000 units of new apartment housing per year through 2035 just to meet the existing trends of demand, according to The situation is no longer simply inconvenient, it is dire. Working up the political will to face it instead of taking the perennially easy way out by ignoring it for tomorrow will take effort not only from builders and government, but from the people who want the benefits of a community where local employees and families can afford to live.

Sustainably addressing housing supply will mean that families can invest in their children, businesses and public services can attract the best talent and new companies are attracted to move to the area. Through this, making housing affordable benefits every member of a community, not just the friends, families and co-workers who finally have the choice to join them there.

This article is a collaborative effort by Tommy Herbert, former Virginia Apartment Management Association (VAMA) Government Affairs lead; Patrick McCloud, VAMA Association Executive; and Pat Shumaker, a former VAMA President.