Rental housing continues to meet the needs of about one in three families in
the United States, or more than 35 million people, at any given time. This population
is projected to rise by another 2 million households over the next 10 years. More
than half (about 19 million) of today’s renters live on annual incomes that
qualify for government housing programs, and only 5 million (over 25 percent of
the needy population) receive direct housing assistance. While the number of
families that need affordable rental units is increasing, the number of rental units
being built and maintained as affordable is declining.
The stock of affordable rental units is eroding because a number of economic
factors are coalescing and encouraging owners to sell the properties. Some of the
reasons for selling are:
1. In hot real estate markets, large financial profits can be made by converting
properties to market-rate rental units or by selling units as condominiums.
For many owners, this is merely good business.
2. In weak real estate markets, owners may be unable to generate enough cash
flow to support debt service. This is especially common after the expiration
of a rent subsidy.
3. Older buildings may need substantial capital and energy improvements for
stability. In many cases, when cash flow is limited and may only support debt
service, properties are left to deteriorate.
4. Building management issues, including criminal behavior, may need to be
addressed. Minimal cash flow and/or poor management may leave issues
unaddressed and undesirable for owners.
5. Many original owners are interested in divesting properties they have owned for
30 and 40 years to focus on retirement and liquidating assets.
6. Many original owners had 15- and 20-year government subsidies with
affordability restrictions. These are nearing the end of the obligation period,
and owners are looking for financial options.
7. Some of the subsidies, in the form of below-market interest rates, have lost
value in the current environment of low interest rates. Owners are uninterested
in government funding programs because they can find alternative
financing without rent restriction requirements.