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Resolving the affordable housing challenge!

According to the International Monetary Fund, global economic growth is forecast to slow from 3.2 percent in 2022 to 2.7 percent in 2023. 

High inflation and stagnant wages, combined with unprecedented quantitative easing, are helping to reduce the risk of a global recession.

Against this background, there is a serious lack of affordable housing worldwide. A shortage of land and rising costs of credit, labor, and materials weakened supply, which, combined with increased demand, led to housing costs rising faster than incomes (see chart).

According to UN Housing, the world needs to build 96,000 new affordable homes every day by 2030 to accommodate the estimated 3 billion people in need of adequate housing.

Housing is not only a safe place to live; it is also a prerequisite for obtaining work, education, health, and social services and is at the heart of the goals of sustainable development.

Despite this bleak outlook, there is an opportunity to create jobs by building more affordable homes for those who need it most, including key workers such as nurses, teachers, and firefighters. Forward-thinking cities must work closely with developers to find equitable solutions for long-term affordability.

With this in mind, we asked Jonathan T.M. Reckford, CEO of Habitat for Humanity International, a global nonprofit housing organisation that helps families build and improve the places they call home, to explain what it takes to build more affordable housing in today’s economic climate. This is what he had to say.

“Lack of affordable housing”

“Certain markets around the world are at risk of asset bubbles.” But more broadly, most of the world’s markets have a huge supply shortage. So we have two different problems. Low interest rates have converged in recent years, and there was a huge influx of private capital that helped. We saw that during COVID-19, a lot of people wanted more real estate, and in some cases, a second home, and millennials bought homes.

“We’re seeing some really exceptional prices in places like Toronto, South Korea, and New Zealand.” “I think the single-family median in metro Toronto has reached over $500,000.” 

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“Rising costs” 

“The math is broken in many cities. We’re a benevolent developer, and we can’t really build what a family with 60% of the median income can afford to rent or buy. In a market where humanity has built a home just two years ago for $120,000, there are currently $200,000 houses, and in areas where we are building $200,000 houses, there are $350,000 houses. 80-120% of area median income. This is what we call workforce housing for nurses, teachers, firefighters, and public safety officers. They also can’t afford to live in many of these expensive markets.

 

“Fears a looming recession”

“Looking at the next 2 months, we have a full-blown affordability crisis, and prices are unsustainable. It was also exacerbated by high labour costs and supply chain disruptions that slowed construction, as well as huge increases in the cost of lumber and other materials. So I think the material side will be moderate, which will help reduce costs.
“Rising interest rates are bad news for people who are trying to buy, but it does slow it down a bit, which probably softens prices a bit, especially at the high end.” The unfortunate thing, of course, is that more units become more expensive to finance and build. So it actually has a negative effect. “So overall, I think we will see a challenge in declining to invest at the level needed to build more units.”

 

 

“Building opportunity at the low end of the market”

“Growing cities have an optimistic side; it’s a way to create jobs and contain inflation.” So now is the right time to invest in apartments at the low and moderate ends of the market. And it can actually help slow inflation.
“If we focus only on the sticks and not the carrots, we run the risk of building a few affordable units without addressing the scale of the problem.” So I think there are things like making it easier and faster to build—density improvements, adjusting parking requirements—because now we have more people living near transit or jobs. All of this can lower programme costs, making it easier for them to build at the lower end of the market.

 

“Developers and cities need to work together.”

“Developers are rational actors, and I believe that simply demonising developers is not going to get us the amount of housing that we need.” So I think the ideal is a negotiated partnership that finds that cities can expect more when they share land if they can make more affordable agreements. And in the long term, we can build new units with continued affordability in mind.


“But it’s about coming up with something that can work both economically and socially and doing it in a way that increases supply in a meaningful way.” The problem is that too many of these things create small amounts of units when we need large amounts now.

 

“Affordable housing is a reality for everyone.”

“The stakes are so high because those of us who have always had good housing take it for granted.” Families who cannot afford it pay 50 to 60% of their income to live or are housed in overcrowded, unsafe conditions. “It’s so important to all the other things we want for our kids.”

 

Source:Wef

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