Housing Affordability Crisis Comes Down to Supply Not Just Rates

SPEAKER_1 (0:00)

And joining us here with Sam on the floor of The Niciest, Scott Alter, co-founder and principal at Standard Communities. Scott, thank you so much for being with us. I mean, we just saw the Fed raise rates again. Sam and I have both been talking throughout the day about looking at the 10-year hitting a level we haven't seen since 2007 As you look broadly at the housing market right now and the affordability crisis, is the bigger issue here at play the cost of borrowing or that there simply isn't enough housing that people can afford to live in?

Yeah.

Scott Alter (0:36)

It's a great question and thank you so much for having me on the show.

Interest rates are certainly a problem right now for the housing market, specifically for building multi-family housing, for building single-family housing. Just generally, it's a big problem, especially as rates have moved almost 100 basis points in 90 days on the 10-year, and it is an interest rate issue. It's also a supply issue. I mean, it really comes down to the more supply we can bring to Americans, then the better and the cheaper it can be. I mean, we do have an affordability crisis. The demand from the renter, from the home buyer, is still there, right? We have Americans are overburdened with rent, and so we have to fix that through supply.

SPEAKER_3 (1:23)

And so, Scott, obviously you deal with the affordable housing market. That is your bread and butter here. If the higher interest rates are kind of here to stay, and it is a supply issue, I mean, you've got your ear to the ground as far as working with government. What are you hearing on that side about the prescription here?

Scott Alter (1:40)

Well, so I'm at Standard Communities. We are one of the leaders in affordable housing around the country. So we are constantly meeting with federal, state, local officials and leaders to figure out what to do.

There has been a huge focus on affordable housing and policy. There just needs to be more and we continue to see the need for it. We can't control interest rates at Standard Communities, but what we can control is providing clean, safe, dignified housing. So we're at a public-private partnership and that is the affordable housing market is in a public-private partnership. So we're looking for the federal government. It has to be the federal government. They hold the purse strings. And so the federal government needs to provide the policy and then we can bring the private capital alongside it. And so the LIHTC program, the Low Income Housing Tax Credit Program, has been around for just about 40 years, and it's a really successful program. We need to continue to add to that program and create other programs to incentivize capital to come into the space.

SPEAKER_1 (2:34)

And Scott, you mentioned affordable housing and giving people clean, safe places to live, but there is a group of Americans here that are sort of caught in this purgatory in the housing market. They make too much money to qualify for these deeply subsidized housing places, but they can't comfortably afford market rate rents. So where does that leave them when buying is essentially out of the question with how high mortgage rates are?

Scott Alter (3:03)

You're absolutely right.

There are some deeply affordable restrictions that make these sort of middle income housing a problem. I think that's where we at Standard Communities have done a really good job of doing, is working within the private markets to create additional housing through different local or state policies that exist through property tax abatements and creating a middle income housing that really is needed. But what we are seeing is that home, just for the mortgage alone, is like 20, across the country averages around $2,300 a month. And then to rent a market rate property is around $2,100 a month. And then for a low income unit is $1,900, and this is around numbers. And so it's really about just creating more supply for renters and both at the low income and at the middle income and at just the market rate. So it's constantly a supply issue. And it starts with, like I said, the policy of the federal government. If they can provide the housing at the lower levels, then market rate can follow.

SPEAKER_3 (4:06)

And so you're New York City born and bred, you work here, but you spend a big chunk of your time traveling around the country. Where is the issue and the challenges the most acute do you think?

Scott Alter (4:17)

It's in the high growth markets, it's in the Californias, it's in the New Yorks, it's in the Northeast.