Can corporations help solve the housing crisis?
As extreme housing inequities grow, public-private partnerships could be a solution to more affordable rent
A successful housing development takes into consideration the cost of construction, the cost of debt, and, ultimately, the cost of operating. To break even, the developer needs a certain amount of revenue. The challenge is whether the revenue required to make the project viable exceeds what many can afford in rent.
Solving this problem is a complex issue hitting local and state governments and now, even employers
While municipalities offer grants, tax incentives, and other means to complete the financing, and the current U.S. administration has created an action plan to help close the housing supply gap in five years, Bob Hunt, JLL Public Institution managing director, says the role corporations play will be vital in solving the issue.
“We’ve got to think about sustainability beyond just the environment; It’s also about making people’s lives viable and productive,” Hunt says. “More and more corporations are recognizing that they contribute to the problem when they bring high-paying jobs into communities that drive up the cost of living. This is their way of helping to provide a solution that makes cities more functional as well as vibrant places to live and work.”
Private housing funds
As the housing crisis intensifies in the U.S., major tech companies are starting to evaluate how they contribute to the problem and what they can do to solve it.
Amazon recently announced a US$2 billion equity fund to help develop affordable housing in three major U.S. hubs facing extreme housing inequities. The fund will allow the corporation to be flexible by market. For example, helping to renew older stock in one city while helping an affordable group buy a market family property and convert it to affordable housing in another.
“But one corporation can’t do it alone,” Hunt says. “Imagine if numerous companies in the U.S. came together in a collective movement and said, ‘We’re willing to put together an investment fund that is going to help build the communities we’re impacting.’”
The issue is widespread. According to the National Low Income Housing Coalition, there is no state or county where a renter working full time at minimum wage can afford a two-bedroom apartment. While estimates vary, Moody’s Analytics estimates that the shortfall in the housing supply is more than 1.5 million homes nationwide. That lack of supply has pushed home prices to record levels — up more than 14% in primary and secondary markets this year, according to JLL data.
Working with the public sector
Working directly with municipalities is another viable option, Hunt adds.
As organizations grapple with their role as corporate citizens in the affordable housing crisis, Hunt says they must understand their motivation behind any initiative.
Corporations, he says have long had a strong case for addressing housing inequalities for the service sector and professions such as teachers and first responders that underpin society, he says.
A significant issue constraining housing supply and production is the lack of available and affordable land. However, local jurisdictions are already looking to overcome this issue by identifying public property that can be repurposed for residential use and released to developers who commit to creating and maintaining ongoing affordability.
Hunt points to a deal he worked on in Seattle where the city had an unused 2.9-acre parcel in the highly valuable downtown area they had acquired during a road project. Valued at $89 million, the development deal yielded $143.5 million–of which $73 million was allocated to the city’s Affordable Housing and Livability fund.
At the time, Seattle Mayor Jenny Durkan described it as a “generational opportunity” to take an underused property and make bold investments to create jobs, more affordable and mixed-income housing, as well as safe transportation connections. Other highlights include a requirement to provide local businesses with lease discounts to create community space, a partner share with YMCA and a collaborative workspace.
Seattle is not alone in its efforts to make affordable housing a priority when selling or leasing land. Los Angeles, CA, Washington DC, and Montgomery County, MD—to name a few—have all championed such initiatives.
Whether working with municipalities or creating funds to address affordable housing, Hunt says corporations—especially those focused on ESG—have an opportunity to affect real change.
“The private sector can play a significant role in solving the housing crisis,” he says.