Coronavirus highlights need for multifamily, affordable housing

The need for more affordable housing long plagued the real estate industry. Then came the coronavirus. In its wake, the pandemic brought heightened attention to the issue and illuminated already vulnerable, low-income populations.

Since COVID-19 began to impact the economy, over 40 million Americans filed for unemployment, hitting service sector jobs hardest — a generally lower-paid workforce. Unemployed service workers account for 15.7% of the country's missed housing payments, which totaled over $1.2 billion in rent and $500 million in mortgage payments per month, according to Zillow.

"The unprecedented rise in unemployment certainly spotlighted the tremendous hardship that millions of Americans are suddenly facing," said Lee Oller, executive vice president of mortgage banking firm Merchants Capital. "It highlights young people who don't have any savings or minority groups or immigrants. It continues to shine a light on how rent-burdened the country is."

Households that are paying more than 30% of their total income toward rent are considered “rent-burdened.” Approximately 49.7% of renters nationwide are rent burdened, according to a 2019 American Community Survey published by the Census Bureau.

That widespread issue, coupled with the difficulties brought by COVID-19, could lead to a rise in housing instability and homelessness.

"If employment does not bounce back as hoped this summer, the housing recovery could be impeded, especially for renters who aren't insulated by the equity owners hold in their homes," Skylar Olsen, Zillow senior principal economist, said in a press release.

In addition to that, rent strikes and missed payments could cause hardship for multifamily borrowers. These missed payments coincide with increased utility and maintenance costs given tenants’ increased use due to stay-at-home orders. Moreover, buildings now require stringent cleaning and sanitizing practices to combat further spreading the virus.

"Many of our clients have reported increased operating costs, even as rental income declines," Oller said. "Of course, these property owners must still pay their mortgages, real estate taxes, utility bills, maintenance and management personnel."

And shutdown orders have slowed the pace of production of new affordable housing stock. In May, at least 350 multifamily housing projects faced coronavirus-related delays.

Merchants Capital specializes predominantly in affordable housing and is going forward with its projects through the Department of Housing and Urban Development insurance and GSE affordable programs, according to Oller.

The Carmel, Ind.-based lender added at least 20,000 units every year through new loan production since 2015. The lender closed 244 new loans for a total of over $2.3 billion and 32,805 units in 2019. It specifically intends to meet the needs of low and moderate income households.

"HUD's multifamily mortgage insurance programs have always been inclusionary to all borrowers regardless of race, ethnicity, gender, or religion," Oller said. "Merchants Capital's long history with the government lending programs assist many minority borrowers and nonprofit organizations with financing options that greatly improve multifamily projects overall."