Being an advocate matters. It’s good for clients and also for our business and long-term success.
Housing affordability is concerning for most people, affecting most places in the country. Even in the relatively affordable Midwest, housing affordability is a growing problem.
By the Numbers
The 2023 State of the Nation’s Housing report from Harvard University’s Joint Center for Housing Studies reveals several startling statistics related to affordability, shortages in available housing, and barriers to first-time homebuyers. Here is a summary:
- Estimated housing payments, including insurance and property tax, to purchase a median-priced home reached $3,000 per month in March 2023, which priced out 2.4 million more renters than the previous year.
- The housing cost burden increased for both homeowners and renters due to higher property taxes and higher rents. In total, 31.8% of homeowners and renters were cost burdened, as they spent more than 30% of income on housing.
- The supply of single-family homes was 30% lower than in 2019 with shortages most severe for lower-priced homes by the end of 2022. Redfin also recently reported in August 2023 that real estate investors are buying 45% fewer homes than a year ago because of the same factors: elevated interest rates, economic uncertainty, and higher prices.
Role of Real Estate Professionals and Investors
What is the role of individual real estate professionals and investors as affordability advocates?
Real estate professionals and investors need to take a leadership role in helping homebuyers, sellers, and renters create and find affordable, quality housing. It does us no good if people cannot afford to purchase and rent the housing we provide. We have a greater sophistication about the options available and a responsibility to act as teachers and advocates for affordability in housing.
The consequences for not leading efforts to help with affordability are:
- More homelessness.
- Less wealth creation.
- More government intervention (think: rent control).
- Losing the ability to influence and shape the outcome for housing in America as real estate professionals and investors.
The last thing we need is misguided government intervention that actually provides less affordable housing options. We must conduct our business and view ourselves as affordability advocates providing options that are of high quality and affordable for homebuyers and renters. This will strengthen our collective voice as we work with individual families, government, and non-government agencies to craft policy decisions that actually provide more housing affordably.
How to Be an Affordability Advocate
There are many ways investors and real estate professionals can educate and help with affordability, including:
- Educating homebuyers and sellers on loan programs with down payment assistance.
- Educating homebuyers and sellers on seller financing options that give more people a path to homeownership.
- Educating homebuyers and homeowners on house hacking or offsetting their housing costs by buying a house with someone else or renting a part of their property.
- Educating investors and homeowners on the potential to add an ADU to their property to offset their housing costs and provide an affordable housing option for others.
- Not allowing homebuyers to get emotional and overpay or even engage in a multiple-offer situation.
- Increasing opportunities for buyers who live in an unaffordable area to purchase an investment property in an affordable area and use the equity to buy more investment properties there to build up equity to purchase a property in the area they prefer to live (but is unaffordable now).
Positive Impact to Your Business
Being an advocate for affordability is good not only for others but also for business. Keep your product of housing affordable for most people and prices stable. Advocate for the best interests of clients, which, in turn strengthens our collective voice when talking to government and non-government organizations about effective, affordable housing policy.
Conducting our business in such a way that we are advocates for affordability, our personal reputation, and the reputation of our brand is strengthened by such efforts.
Why It Matters
It is in our collective interest to ensure that as many people as possible can afford housing for price stability and the wealth effect it produces for our clients.
Housing has become unaffordable for too many, there is not enough of it, and first-time homebuyers need help reaching their homeownership dream.
What is the consequence of not being an affordability advocate? The housing we provide continues to be affordable for fewer and fewer people, price stability comes under pressure and others will shape housing policy without us.
There are many practical ways we can act as advocates for affordability, including educating our homebuyers about the options for reducing the cost and barrier to home ownership. Being an advocate matters because it is good not only for our clients but also for our business and long-term success.