Housing Frenzy Emphasizes Immediate Need for More Affordable Housing Options
Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIndianapolis is one of the top housing markets in the country, according to a recent 2021 list by Forbes. And it’s not surprising why.
Indianapolis is in an ideal location adjacent to a booming tech scene filled with good jobs. The city has evolved into a sporting event haven, as it recently served as the location of the 2021 March Madness Tournament and will host the national championship game of the 2022 NCAA College Football Playoffs. Overall, it embodies a perfect blend of a big city with a touch of Midwestern charm.
As more families and young professionals move to the Hoosier state, we can’t anticipate Indianapolis remaining a secret much longer. In fact, the new Census estimates that the state grew more than 5% in the last decade, gaining more than 302,000 new residents.
However, this positive sentiment ignites some worries.
The Housing Market Frenzy
Right now, in alignment with the rest of the country, the Indianapolis housing market is in a frenzy. According to Realtor.com, national median home list prices shot up 17.2% year over year in April to hit a new record high of $375,000.
Another recent report found 2,600 fewer homes available for purchase in Indianapolis compared to the previous year, making it harder for the average buyer to be competitive in today’s housing market. It also found that the average cost of buying a home had increased by 19% in the past year. Because of this, buyers are engaging in risky tactics, such as offering money above the list price and skipping inspections.
Another concern is the rapid increase in construction costs, which have driven up housing prices due to shifts in supply and demand. Furthermore, a limited supply of land to build on and finding skilled labor has become increasingly more difficult, adding to the rising construction prices.
This is worrisome for a couple of reasons. Right now, homeownership is desired but unattainable for many because they are cost-burdened, meaning they are spending more than 30% of their income on housing. Even before COVID-19, 30% of households were considered rent-burdened, according to the latest report by the Harvard Joint Center for Housing Studies.
Furthermore, slight upticks in rent costs are also making homeownership more difficult, as a recent Apartment Guide 2021 Rent Report found that the average rent for a one-bedroom apartment in Indianapolis has increased by 11% since the previous year.
The Affordable Housing Shortage
According to the National Low Income Housing Coalition, there is currently a shortage of 6.8 million affordable housing options for extremely low-income renters. Hoosiers, specifically, face a shortage of more than 126,000 affordable housing options available for extremely low-income renters. When looking closer at Hamilton County, one-third of households are rent-burdened.
Fortunately, there are many ways we can address this. But it requires a long-term commitment by our local and federal governments to reverse this predicament in the U.S.
For instance, federal agencies need to incorporate different legislative priorities to help close the gap and bring more affordable housing to Indianapolis and throughout the state. This includes creating more Tax Increment Financing (TIF) districts, tax abatement policies and targeted soft funding.
Another way would be lowering the 50% test to deliver a more instantaneous change in Low-Income Housing Tax Credit (LIHTC) projects, which could deliver a more immediate impact on affordable housing needs. In fact, according to a recent analysis, lowering the 50% test for tax-exempt bond-financed affordable housing developments would result in the creation or preservation of as many as 1.4 million homes by 2030.
We also need to dispel the negative stigmas that surround affordable housing, making it a primarily misunderstood topic by the public. In reality, the lack of affordable housing can be devastating for communities in numerous ways, such as driving out residents and losing potential workers, such as teachers, firefighters, service workers, and local business owners.
Failing to step up with adequate housing can discourage growth in local economies, which we need now more than ever before as we begin to recover from the pandemic. These myths and misconceptions need to be proactively dispelled by local government officials by emphasizing how vital affordable housing can boost the economy.
The light at the end of the pandemic is near. However, we still need to address the crisis facing our nation when it comes to housing. While many alleviating efforts are underway to help this problem in communities across the U.S., many challenges still remain. We must seek additional action to close the gap in the affordable housing crisis.