When it comes to affordable housing, there’s no single party that can accept the blame (or even the majority of the blame). It’s more a product of a decades-long system than anything else. And rather than point fingers, we all need to work together to look for creative solutions to making at least a percentage of the market more affordable to low-income and middle-class families. Landlords and rental property owners have a unique opportunity to lead the charge.

Understanding the Affordable Housing Crisis

According to the National Low Income Housing Coalition (NLIHC), not a single state in the U.S. has an adequate supply of affordable rental housing for the lowest income renters.

“The U.S. has a shortage of 7.3 million rental homes affordable and available to renters with extremely low incomes – that is, incomes at or below either the federal poverty guideline or 30% of their area median income, whichever is greater,” the NLIHC explains. “Only 33 affordable and available rental homes exist for every 100 extremely low-income renter households.”

Where does this crisis stem from? There are dozens of responsible factors, including:

Investment firms. Over the past 5-10 years, major international and national investment firms have gobbled up real estate and now rent it out at extremely high rates. In some cases, they even corner isolated markets, which allows them to control how much the “going rate” is.

Land restrictions. In many markets, there are serious zoning restrictions on new housing developments. This limits the supply of new units available and increases demand for what’s currently on the market. As the laws of supply and demand dictate, prices increase.

Lagging wages. You could make a case that it’s not an issue of rental rates rising to a point that people can’t afford housing, but wages being so slow to increase that they can’t keep up with normal increases in rent.

Lack of rent controls. In some markets, there’s an embarrassing lack of rent controls. (Either that or rent control laws largely go unenforced.) This means rental rates rise extremely fast and have nothing holding them down.

In other, using the term “crisis” is not an overstatement. If anything, it’s an understatement. Finding affordable housing as a renter is challenging in most markets (and nearly impossible in some markets).

If we want to address issues of poverty, debt, and unemployment, it all starts with making housing more affordable. 

5 Steps Landlords Can Take

As a landlord, there are a number of proactive steps you can take to make housing more affordable while still generating a positive ROI on your properties. Let’s take a look at some different ideas:

1. Implement Tiered Rates

One approach for landlords and rental property owners is to implement a tiered rental structure, where rents are set based on the income of tenants. This progressive approach allows lower-income tenants to have access to housing at a price they can afford. In implementing this model, it is important to ensure that all parties understand the scheme and the reason for its implementation.

2. Invest in Affordable Housing Projects

When building new properties, do your best to invest in affordable housing in areas that need it.

“One of the root causes of the housing affordability crisis is a lack of inventory; you can fight back against this by building new properties in areas with reasonable levels of demand,” Green Residential explains. “This may be tricky, as you may be forced to deal with restrictive regulations or minimally available plots, but if you can thread this needle, it could be very profitable for you.”

3. Offer Rent-to-Own 

Many people have the income to buy a house, but they’re stuck renting because of poor credit and other bad marks on their profile. By offering rent-to-own properties, both sides benefit. You get to generate monthly cash flow and the renter has the opportunity to work themselves into a situation where they’re able to buy the property and experience some financial stability. 

4. Partner With Government Subsidy Programs

Many governments offer a variety of programs to encourage landlords to offer affordable housing, such as the Section 8 housing choice voucher program in the United States. By participating in these programs, landlords can receive regular rent payments from the government while providing affordable housing for those who need it most.

5. Invest in Rehab Projects

Instead of constructing new buildings, another viable option is to invest in the rehabilitation of dilapidated buildings and the adaptive reuse of commercial properties. This can be a more cost-effective approach and it also contributes to community revitalization. Not only does this make use of existing infrastructure, but it also preserves the character and culture of neighborhoods.

Adding it All Up

Landlords are not to blame for the affordable housing crisis – let’s be clear about that. This crisis is the byproduct of hundreds of decisions made by thousands of people over the years. With that being said, landlords can start to create positive momentum in making housing more affordable by taking a few proactive steps. Hopefully, this article provides a good starting point for conversation!