Lending a HAND in Combating Las Vegas’ Affordability Crisis

Nevada HAND Director of Real Estate Development David Paull discusses the city’s growing affordable housing shortage and details the legislative changes that have the potential to shift the supply upwards.

David Paull, Director of Real Estate Development, Nevada HAND. Image courtesy of Nevada HAND

David Paull, Director of Real Estate Development, Nevada HAND. Image courtesy of Nevada HAND

Although apartment rents were up 7.3 percent year-over-year through April—the highest rate among major U.S. metros, according to Yardi Matrix—Las Vegas continues to attract Millennials and retirees evading the high living costs of California. But rising rental rates, along with an increasing housing demand and high construction costs, are clashing with the metro’s inventory shortages, putting pressure on affordability.

Nonprofit Nevada HAND has recently received $22 million in state bonds for the construction of a 420-unit community, 386 of which are expected to be affordable. The project surpasses the yearly goal of producing 279 affordable housing units citywide. Director of Real Estate Development David Paull provides details about the organization’s projects and elaborates on how access to federally owned land could enhance Las Vegas’ affordable housing stock.

How serious is Las Vegas’ affordable housing crisis?

Paull: We consider the affordable housing crisis in Las Vegas to be severe and growing. More than 112,000 renter households in the state pay more than half of their income to housing costs and, like other metropolitan areas of the U.S., supply simply isn’t keeping up with demand. There are several key factors that have led to the shortfall: costs of labor and construction; land costs; the weakening of the federal low-income housing tax credit program by the Tax Cuts and Jobs Act; and the stigma around affordable housing are just a few.

Nevada is a state with a significant amount of federally owned land, and having more access to that land at a reduced cost could substantially help mitigate some of those costs, but the barriers to getting that land released are considerable. We’re also seeing more affordable homes being lost as they approach the end of their mandated affordability period, which puts them at risk of being sold and placed at market-rate rents. This displaces the residents who can no longer afford to live there.

LISTEN TO: Podcast: What’s Hindering Affordable Housing Construction

Which areas of the metro are least affordable?

Paull: In Southern Nevada, the areas in and around Summerlin, swaths of Henderson and the quickly developing West Henderson area, where the Raiders are building a state-of-the-art practice facility, are quickly becoming real estate hotbeds. The southwest area of the town also continues to be in high demand.

What trends are you seeing with Nevada’s affordable housing projects?

Paull: We see trends in sustainability and energy efficiency, and our construction team makes sure that we use energy-efficient appliances and drought-efficient landscaping. We take advantage of a low-income solar program to outfit our newer communities with solar energy—it helps our residents with utility costs and helps us become better stewards of the environment and community.

Rendering of Rome Pines. Image courtesy of Nevada HAND

Rendering of Rome Pines. Image courtesy of Nevada HAND

You’ve added three communities to Las Vegas last year alone.

Paull: Nevada HAND is excited to be finishing up the first phases of two new communities. Rome Pines is a family community located in an up-and-coming neighborhood in North Las Vegas. It is located within walking distance of two elementary schools, parks and retail and will have 292 units when completed. Our senior development, Flamingo Pines, is located in a high-demand area in the southwest part of the Valley and will have 175 units of independent senior living. Both are scheduled to open in the fall. Additionally, we just received financing for a 400+ unit, mixed-use development in central Las Vegas that we’re hoping to start construction on early next year.

What challenges did you come across in developing affordable housing projects in Nevada? How did you overcome them?

Paull: One of the biggest challenges we have had is that because of the recession, home prices and apartment rents dropped significantly in Nevada. Due to the drop in home prices and rents, the community did not recognize that we have a long-term affordability issue. Therefore, very little funding was provided for affordable housing.

As an organization, we launched an education effort that included hiring an economist to create a study showing the long-term affordability issues we face as a community. Our educational efforts extended to local and federal representatives, business leaders and jurisdictional staff. Through our efforts, we were able to see a major focus on affordable housing in the 2019 state legislative session.

What changes in the current local legislation would encourage the construction of more affordable housing units?

Paull: Nevada just finished its legislative session and we had a few key pieces of legislation that have the potential to significantly shift supply in the state. Nevada HAND advocated for the formation of a state affordable housing tax credit program, which has the potential to add about 600 units a year to the state’s affordable housing inventory. When you consider that the federal LIHTC program adds about 1,000 units every year, it’s a significant boost.

Rendering of Flamingo Pines. Image courtesy of Nevada HAND

Rendering of Flamingo Pines. Image courtesy of Nevada HAND

We know it’s nowhere near enough, though, which is why we also advocated for legislation to enable local jurisdictions to assist affordable housing developers by reducing certain building fees, impact fees or enterprise fees as well as other policy measures that streamline and open up additional avenues for ease of development. We’re also encouraging our federal delegation to support the Affordable Housing Credit Improvement Act (S. 1703, H.R. 3077), which would increase the annual housing credit allocation authority by 50 percent and provide other streamlining and flexibility measures to help produce and preserve more affordable housing.

Land use also represents a major opportunity for the growth of affordable housing in the state. We need to provide a mechanism for local governments throughout Nevada to reserve federal Bureau of Land Management land for the use of affordable housing. With about 85 percent of Nevada’s land being federally owned, this is a significant way for affordable housing developers to access land at a rate that would make these developments financially feasible.

READ ALSO: Top Multifamily Completions in Las Vegas

How do you expect the affordable housing market in Nevada to evolve in the next few years? 

Paull: Nevada is seeing record population growth and that will continue to feed the housing market. Clark County registered the nation’s second-largest population growth from 2017 to 2018, according to the U.S. Census. While the market continues to produce high-end homes, both in rental and for-sale product, it will fall behind on the affordability factor of those homes for many of the people moving here.

A few years ago, we commissioned a study from Applied Analysis to take a look at the next decade and the need for affordable housing in Southern Nevada. In the next decade, the affordable housing shortage will grow in numbers, due to the compounding nature of our existing shortfall and the number of affordable housing units that will simply not be preserved, but it will grow in breadth as well, to more of the middle-income families earning between $35,000 and $65,000 annually.

This is significant because one in four southern Nevada households fall into this segment, which is referred to as the “missing middle.” We’re talking about an additional 186,000 households, about half of which are renters.

What is the solution to this affordability crisis?

Paull: Nevada, like other states, however, is realizing that a stable, affordable home—no matter your income level—is paramount to other parameters of economic success. Good, stable housing helps children attain better educational and social outcomes, it helps seniors age in place longer and with dignity. Workers in stable housing are more productive employees and overall health and wellness improve. Nevada realizes that and is taking strides to address the shortage.

And while there isn’t one singular solution to the affordable housing crisis in Nevada, there are practical, actionable steps we can take at the local, state and federal levels, leveraging public-private partnerships and using creative, entrepreneurial approaches to everything: from land use to financing and resident care. I am hopeful that the momentum from the last legislative session, as well as the general buzz around the issue, will continue to stay in the spotlight.

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