Affordable housing shortage

Can a private investor produce and operate affordable housing without government or not-for-profit intervention? Can old motels and boarded-up warehouses find a profitable new life? Can people with social struggles find safe housing to fit their needs and lifestyles? In short: yes, with some collective will and common sense on the part of investors, government, and society in general. At the heart of this discussion lies a conflict that pits homelessness against jurisdictional regulation that serves to drive up the cost of housing.

As a perceived solution, all levels of government are happy to throw public money at the problem of housing. Wouldn’t it be nice if private enterprise could find a way to participate in the solution? If only there were a way that a property developer could invest their money in a property, provide low-cost housing in an underserved sector of the market, and make a suitable return on the investment. In most free enterprise markets, if there is a profitable way to meet a need, the market will address the need. The ‘affordable housing market needs to find a place of profitability in our free enterprise world that does not require government subsidies and programs.

It is little wonder that free enterprise stays away from the affordable housing sector of the market. The problem lies in the cost of acquiring the units versus the investment return earned for renting out this type of housing. The housing of almost any conventional description is simply too costly to purchase or build to be affordable for lower-income housing participants. If investors could acquire investment housing at lower prices, then there would be a supply of affordable housing units. So, how do we get there from here?

To achieve the goal of lower acquisition costs for investment housing units, we need to address how and where people live. We need to re-invent housing. We need to innovate. We need to re-examine what constitutes a home. We need to empower investors with ways and means to make investment housing acquisition costs affordable so that they can pass on that affordability to the lower-income occupants who cannot compete for more expensive housing stock. We need affordable housing models to provide housing that is affordable on every level; to own, operate, and live in.

The first place to look for more affordable entry points is in the re-application of buildings such as older motels, hotels, warehouses, and office buildings. While this has been done extensively in the past, the resulting buildings are more generally targeted at high-income users due to the high cost of renovation.

Herein lies an important yet unintended consequence of our building code system. As it stands, the building code is partially serving to reinforce the creation and provision of unsafe homes. Because the cost of retrofitting buildings to the current code is so high, many existing marginal buildings such as old rooming houses, motels with monthly rentals, and inner city hotels do not get fixed or renovated. Instead, these older, disused properties are left to deteriorate.

In states of disrepair, these buildings only serve to meet the needs of those who cannot afford better housing. The occupants of these ‘de facto affordable housing projects’ are subjected to increasingly dangerous and unsuitable housing conditions. In short, the building code bar is too high to reach. With these older, marginal properties, the costs of meeting the building code will not provide an economic payback. So many property owners never even bother to try.

My contention is that, with enough government will, and with very little money, these barriers could be removed. We need to find a way to turn back the clock on the building re-use industry, make it affordable, and make it address the needs of affordable housing.