Affording Affordable Housing: Diversifying a Portfolio with Affordable Housing Can Improve the Bottom Line, but Managers Must Pay Attention to Strict Rules and Regulations
Rogal, Brian, Journal of Property Management
When Stephanie Townsend, the primary site manager at an affordable housing community in Columbus, Ohio, started her job about four years ago, she was nervous about the stereotypes surrounding such properties--including the perception crime rates are higher and rent doesn't get paid.
She soon found stereotypes are just stereotypes and good management can resolve common problems regardless of property type. Townsend, who works for Wallick Properties Midwest LLC, manages Emerald Glen--a 130-unit collection of townhomes built 10 years ago with federal tax credits. Despite her nearly 15 years of experience managing conventional properties, Townsend said she was unprepared for what affordable housing had in store for her career.
"I had all these years of experience in property management, [but] when I transferred to Emerald Glen I was lost," she said. "I was a little scared when I came here, but I figured out how to make it work."
She figured out how to make it work because she knew there was a demand for affordable housing managers--especially for managers who could go beyond managing a property to handling all the government regulations and social programs attached to the properties. That demand still exists, and Townsend said the need for good managers will expand in the future.
SUPPLY AND DEMAND
Across the country, low-income renters in need of affordable housing outnumber the units available--a trend that has existed for years, experts said.
According to information from the National Low Income Housing Coalition, a nationwide shortage of about 1.7 million affordable housing units existed in 2003 for renters with extremely low incomes--individuals who earn 30 percent or less of their local area's median income.
More recently, state research analysts in Virginia found the state offered 99,375 subsidized apartments targeting low-income families. At the same time, more than 235,000 families earned 40 percent or less of the area median income. Those families more than qualified as renters with very low incomes--individuals who earn 50 percent or less of their local area's median income.
The vast differences in supply and demand indicate business opportunities exist in the affordable housing arena. However, weighing the need against the challenges this type of housing presents is important before entering the market, said Judy Weber, CPM and a principal for Viva Consulting--a firm focused on housing, development and management solutions.
"There is a market for it, but it's very demanding," Weber said. "It's increasingly difficult to do affordable housing. The reason people do it is because they find it more interesting and socially redeeming to find housing for people who don't have choices."
TAXING RULES AND REGULATIONS
Affordable housing has become increasingly difficult to manage because of bureaucratic rules and regulations and because of the red tape inherent to the various types of housing, real estate managers said.
The two major types of affordable housing are subsidized housing and low income housing tax credit properties. Traditionally, project-based Section 8 and voucher-based Section 8 subsidized housing have been the most common types of affordable housing.
In project-based Section 8 housing, the subsidy stays with the unit or the project itself. As long as a person lives in that unit, he or she will be subsidized. In exchange for this financing, the government requires property owners to reserve the homes for low-to-moderate-income families, who generally pay 30 percent of their income toward rent while the government pays the rest.
With tenant-based or voucher-based Section 8 subsidies--available through the Housing Choice Voucher Program--the subsidy travels with a family so it has a housing choice. Private real estate managers have contracts with the public housing authorities, allowing them to enter into leases with families who have vouchers. …