This month’s National Association of REALTORS® (NAR) Power Broker Roundtable discusses the affordable housing shortage, and potential solutions.
Christina Pappas, District Sales Manager, The Keyes Company, Miami, Fla.; Liaison for Large Firms & Industry Relations, NAR
Bill Plattos, Executive Vice President, First Team Realty, Orange County, Calif.
Dan Forsman, President & CEO, Berkshire Hathaway HomeServices Georgia Properties, Atlanta, Ga.
Helen Hanna Casey, CEO, Howard Hanna Real Estate Services, Pittsburgh, Pa.
Christina Pappas: Again this year, we find ourselves headed into the spring buying season with inventory in short supply in many areas of the country, and, as prices continue to escalate, with existing inventory far more attainable for high-end buyers than for even the most persistent first-timers. So, the question arises: How do we solve the need for entry-level housing? A recent story in the Los Angeles Times said that the LA County Board of Supervisors is proposing an ordinance that would require developers to include a small percentage of affordable homes in their new projects. In Silicon Valley, where the average cost of a single-family home tops $ 1 million, tech giant Facebook invested $ 18.5 million last year in a new partnership project designed to create regional solutions to the affordable housing crisis. Are either of these efforts viable or sustainable? Are there other, better answers? Bill?
Bill Plattos: You hit the nail on the head, Christina, with the issue of low inventory. In high-priced Orange County, the average home brings multiple offers in its first few days on market, so there’s no incentive for sellers to offer concessions, and not much opportunity for first-timers unless they have lots of cash. And the student debt load many are shouldering makes it tough to get financing. I know of one young man, an attorney making $ 180,000 a year, who can’t get a loan because of his sizeable student debt.
Dan Forsman: It’s a daunting scenario. Some first-timers are getting co-signers, maybe parents who are willing and able to help. Others are having to go further out in the suburbs, where land and home prices are cheaper, or go from apartments to lower-priced condos before they can get into the single-family home they want.
Helen Hanna Casey: Sometimes even condos are out of reach, at least in the city center. I’m not sure it’s feasible to require developers to include low-cost units, but I do believe we’re not building enough, and there should be ways to incentivize them. I also think we need to encourage more homeowners, specifically empty nesters, to sell. We should be reaching out to empty nesters in the older homes and neighborhoods as a prime source for new listings.
DF: It’s also important for first-timers to work with strong agents who know the territory and know where and how to look and how to put deals together.
CP: What about focus groups working specifically on behalf of first-timers, many of whom, as Bill pointed out, are earning substantial incomes?
BP: There are focus groups going at every board level on the issue of affordable housing, but the options are pretty limited, as are land and space. The average sale price in our market is $ 600,000, and as for requiring builders to include low-cost units in the midst of high-end developments, builders know there’s a NIMBY (Not In My Backyard) factor among luxury homebuyers.
CP: What can be done to ensure that we’re keeping up with the demand for affordable housing?
HHC: One solution is to incentivize builders to create more master-planned communities, or attractive spaces intended to accommodate homes at different price points.
DF: The rent-to-own option seems to be making a comeback. Some of our agents and clients are working with Home Partners of America, for example, which buys the house of the client’s choosing and offers them a lease with the right to purchase later. There are fees and premiums, and it won’t work for everyone, but it does offer a path to homeownership for responsible people who, for whatever reason, can’t get financing just yet.
BP: Renting for a time is not the end of the world. It’s a good way for recent grads to build credit and save the down payment.
HHC: Yes, it is, but patience is not a strong suit of today’s millennials, especially among the higher earners. With the credit crunch finally easing, maybe lenders can be motivated to factor student loans into the mortgage process in more practical and workable ways.
CP: And those kinds of issues are precisely why we need to be talking about this in our local markets. The answers are out there and so are the buyers. It’s our obligation—and it’s to our advantage—to move them to the front burner.
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