Last week, Urban Land Institute (ULI) Nevada district council and Congresswoman Susie Lee hosted a roundtable discussion addressing the critical needs of housing affordability in Southern Nevada. Participants were from the private, public, and nonprofit sectors who play a key role in development, architecture, planning, zoning, workforce development, and finance.
Nina Janopaul, who sits on the national advisory board for ULI's Terwilliger Center for Housing, started the event with a presentation titled “Underproduction and Unattainability: US Housing in 2022”.
Long-Term Underproduction of Housing
One of the reasons why the United States is having an affordable housing crisis is the underproduction of housing in the past decade. After the 2008 global financial crisis, many home builders took a long term to recover from the crash.
“As people migrate in search of jobs, education, and economic opportunities, the demand for housing in our most economically productive regions far exceeds the production of new homes. With 3.8 million homes short of meeting housing needs, double the number from 2012, the nation is in an extreme state of Housing Underproduction,” according to Up for Growth, a national data-driven research network.
In 2019, 169 metro areas experienced underproduction. Nevada underproduced about 30,000 units of new homes in 2019, and this number must be higher now due to the immigration pattern we are seeing during the pandemic. People who live in gateway cities like Los Angeles, San Francisco, and New York are moving to secondary cities like Las Vegas, Austin, and Miami.
Rents in Las Vegas Soars during the Pandemic
According to Yardi's Matrix National Multifamily Report released in July 2022, trailing 12 months rent in Las Vegas MSA increased by 14% year-over-year from July 2021.
In January this year, John Burns Real Estate Consulting ranked Las Vegas one of the top 3 rent growth single-family rental markets with an 11% year-over-year growth from January 2021.
Extremely Low-Income Renters are Facing Critical Challenges
According to the Nevada Housing Coalition and National Low Income Housing Coalition, Nevada has the country’s most severe shortage of rental homes affordable and available to extremely low income households. There is a shortage of 84,320 rental homes for extremely low-income renters. However, the state had only 597 units net inventory increase in 2020 for Nevada low income housing projects.
Nevada only has 20 affordable and available homes per 100 renter households, and 81.5% of extremely low income Nevadans paying more than half of their income on rent.
Cost of Construction Soared During the Pandemic
According to Joint Center for Housing Studies of Harvard University, new residential construction cost (excluding capital, labor, and imports) was up 20% year over year in February 2022. The pandemic caused shortages of building materials and supply chain disruptions, thus pushed up construction cost.
Solutions: Legalize, Reduce Costs, Invest and Incentivize
Reduce costs can be breakdown into: financing cost, construction cost, land cost, hard cost in the long term.
The federal and state programs offer developers different financing options to reduce the financing cost of the project such as National Housing Trust Fund, Capital Magnet Fund, New Market Tax Credit, Low-Income Housing Tax Credit, and Tax-exempt bonds for housing production.
However, these financing programs usually take a long time to get approved, have many layers of applications and paperwork, and require consultants, lawyers, and tax advisors who understand these programs. All of these hurdles prevent small nonprofits and developers to build affordable housing. The state and local municipalities must work together and agree to simplify and speed up the entitlement and permitting process for affordable housing projects in Nevada.
There are many other policy decisions can be made at the local level such as create denser zoning, reduce permitting fees, and subsidize low-income households.
Tiny homes and container homes were brought up during the roundtable discussion. However, these innovative construction methods are facing many zoning and regulation challenges. Laws and regulations are not being updated frequently to keep up with the new technology coming out every year.
What makes Las Vegas great is the people. The previous generation of pioneers built the world famous Las Vegas Strip in the middle of the desert. Innovation and entrepreneurship are parts of our city's spirit. We have been innovating and pushing beyond the limits in entertainment, hospitality, tourism, and now sports. Then why can't we be innovative in housing?