This spring, due to the COVID-19 pandemic, the national unemployment rate reached a peak of 14.7 percent—the worst figure ever recorded in the 72 years that unemployment data has been tracked.
When stay-at-home orders were issued, millions of Americans lost their jobs overnight and are soon going to be unable to pay rent when extended unemployment benefits end. Millions more felt the brunt of lost wages. The surge in unemployment sent the multifamily industry scrambling for both immediate and long-term solutions. Despite the work of on-site teams to structure payment plans that help renters maintain residency, the loss of income has undeniably impacted operating budgets.
The economic downturn also placed a glaring spotlight on the affordable housing crisis we face in this country. Despite national conversations, multifamily has always left the need for affordable housing unmet. But now the demand is peaking new heights.
Prior to COVID-19, mixed-income communities were starting to gain traction as a potential solution. But as multifamily began to navigate operations in the midst of economic shutdowns and social distancing orders, mixed-income housing demonstrated an ability not only to maintain operations but also to provide an economic safeguard.
Mixed-Income Saves Budgets
Mixed-income housing—which features affordable housing alongside market-rate homes—is poised to perform significantly better financially as the pandemic continues to impact employment and wages.
Because housing programs subsidize rent payments for affordable housing units, properties with mixed-income housing will at the very least receive the subsidized payment for affordable units even if the renter is unable to pay. This allows mixed-income housing providers to maintain a greater portion of their budgets, which keeps them on track in terms of operational expenses and upkeep of their properties.
At market-rate properties, 100 percent of rent that isn’t paid is lost, and could result in deferred community maintenance due to budget shortfalls. This potentially affects the long-term condition of these assets while their mixed-income counterparts are able to maintain service levels.
The Socioeconomic Upside
The socioeconomic appeal of mixed-income housing surfaced during the pandemic, as well. By alleviating poverty concentration, mixed-income housing delivers a stronger sense of community through an increased acceptance and valuation of diversity. What follows is improved quality and preservation of the housing stock and increased property values. It ultimately yields better coordination and delivery of social services, as well, and a more robust environment in which to live and raise a family.
Both property management companies and residents have a stake in preserving this type of community. That sense of unity and shared direction is invaluable in times of crisis.
While implementing social distancing practices at our properties was clearly necessary, it has been isolating for residents. The pandemic tested the strength of the bonds at our communities. In times of stress and isolation, a strong sense of belonging and togetherness is an important ingredient.
Solving the Affordable Housing Crisis
Through a unified commitment to the development of mixed-income housing, the multifamily industry has an opportunity to address the dire and ever-increasing need for affordable housing in our country. As the pandemic has proven, no housing market is immune to economic downturn, and all levels of the workforce are impacted.
Beyond the socioeconomic and community benefits of income diversity, mixed-income communities provide our industry with a proven response to the challenge of meeting the urgent affordable housing need. The mixed-income model is now battle-tested by COVID-19, and has demonstrated its resiliency and stability to multifamily owners and investors.
Mixed-income housing is not only the immediate and feasible answer to the affordable housing shortage. As the multifamily community braces for the next economic downturn, it may also be our best defense.
Michael Leithead is the executive vice president & chief administrative officer for Edgewood and Vantage Management. He manages and oversees a large portfolio of multifamily communities with a focus on both affordable and market rate properties. Additionally, as CAO he oversees corporate administrative departments which support the Edgewood Operations team.