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The U.S. faces a 5.5-million-unit housing shortage, according to a research reportpdf commissioned by the National Association of REALTORS® in 2021. The largest gap remains in the middle-income price range, called the “missing middle” by housing experts. Yet, even as millions of Americans are priced out of homeownership, many affordable housing projects have stalled due to increased regulations and higher costs, panelists said in a Nov. 10 session at NAR NXT, The REALTOR® Experience, in Boston.
Panelists at the session, “How Bringing Back ‘Missing Middle’ Housing Supply Can Help Solve the Supply Crisis,” called on real estate professionals to help advocate for a greater mix of housing that can include all price points within their communities.
“This isn’t a ‘red’ or ‘blue’ [political] issue; it’s not just a rural or urban issue … it’s an everywhere issue,” said speaker Troy Thiel, CEO of the Thiel Team in Madison, Wis. Over the years, he has advocated for affordable housing projects in Seattle, Chicago, Madison, and elsewhere. “We need to get more people involved … and let’s bring the answers to solve this challenge for our communities.”
Thiel and the other panelists suggested a variety of solutions for putting a dent in the housing supply crisis. For example, governments might look at the massive uptick in multifamily construction over the past couple of years and incentivize developers or building owners to convert some of these apartment units into homeownership opportunities. Other solutions: greater support for modular housing production to help trim costs, office-to-residential conversions, and more flexible zoning laws.
Key Strategies
Tom Truong, real estate pro and team leader at eXp Realty in Southborough, Mass., identified key areas for real estate involvement:
- Zoning reform: “Zoning laws often favor single-family and large multifamily developments, but that excludes middle-scale housing like duplexes; three- and four-family [buildings]; and townhomes,” Truong said. He urged real estate professionals to join coalitions or form community groups to advocate for zoning code reforms that allow for development of more diverse and denser housing types, including townhomes, cottages and accessory dwelling units.
- Targeted financial incentives: “Financial support is typically directed toward large-scale affordable housing, leaving missing middle projects without adequate funding,” Truong said. He suggested communities advocate for expanded tax credits, including middle-market housing programs similar to the Low-Income Housing Tax Credits (or LIHTC), and fee waivers or expedited permitting that could help make smaller projects more viable. Also, grant programs could help fund predevelopment costs to lower the entry barriers for builders, Truong said.
- Outvote NIMBYism: Affordable housing efforts often face backlash from NIMBYism, the idea that residents don’t want projects located near from their homes. “Public opinions have slowed and blocked housing projects, especially smaller multifamily units,” Truong said. Real estate professionals can help educate their communities on the benefits of diverse housing, such as for greater neighborhood stability and affordability for all income levels. “The best way to do this is to not go in by yourself,” Truong said. “Come in as a group or organization within your community so that you have more people behind you. … We need to mobilize, to unify our voices so we become one stronger voice.”
How Massachusetts Is Doing It
Tamara Small, CEO of NAIOP Massachusetts, said her home state has faced a significant downturn in affordable housing. Home prices in Massachusetts have surged more than 40% since 2018, she said. Meanwhile, since the 1970s, housing production has fallen significantly, despite growth in the state’s population and employment. The state has identified the need for 200,000 units to be built by 2030, she said, yet developers have increasingly scrapped plans due to high construction costs and stiff regulations.
In August, Massachusetts passed the Affordable Homes Act, which included a number of housing initiatives to tackle affordable housing in the state. It included the nation’s first office-to-residential conversion tax credit. Such projects can be costly and complex, but by lessening the cost for developers, Small said, conversions could be “one piece” in addressing the state’s housing shortfall. The bill also supports construction of accessory dwelling units on single-family lots and sets out the state’s first housing plan, which outlines housing goals region by region. It also included restrictions to prevent “frivolous appeals” that have led to abandoned or delayed projects.
Addressing the housing shortage is not just a quality-of-life issue, she added. It’s also about improving the state’s economic competitiveness.
“We passed this great bill … and we’re seeing some progress,” Small said. “We need to keep our foot on the gas pedal, now and for the foreseeable future.
“What we found is that when the Massachusetts business community got involved,” Small said, developers could progress with their plans. “We can tackle the housing crisis when we form these broad coalitions of small business leaders, associations and community groups.”
