6 Cities Affordable Housing Developers Should Target for New Construction
Commercial real estate investors and developers have expressed a commitment to addressing the nation’s affordable housing crisis. According to the National Low Income Housing Coalition, the US needs 7.3 million affordable housing units to meet current demand, but of course, some cities are suffering from a greater shortage than others. The coastal markets and major metropolitans typically steal headlines for the high cost of housing. New York, San Francisco and Los Angeles are among the cities with the highest cost of living in the US, and yet, these cities do not top the list for affordable housing shortage. Instead, six sunbelt markets that have seen significant population growth in the last decade are now suffering from a dearth of affordable housing—and many of these cities are places that would otherwise be considered affordable.
As developers look for opportunities to build new affordable units, here are the markets that should be on the radar.
Las Vegas, Nevada
Las Vegas, Nevada, has the most severe affordable housing shortage in the US. According to research from the National Low Income Housing Coalition, the city has only 13 available affordable units for every 100 low-income residents. According to an analysis published by the Las Vegas Journal Review, 85% of the homes sold in Las Vegas Valley in 2023 were not affordable. The high cost of housing has kept many would-be home buyers in the rental market, exacerbating the problem. Economists note that new affordable housing supply is critical to addressing the city’s shortage.
Houston, Texas
Houston, Texas, has only 15 available affordable units for every 100 low-income residents. In whole numbers, that equals 33,000 affordable units available for 217,000 low-income renters. As a result of the shortage, 80% of low-income renters are experiencing housing cost burdens, meaning that they spend more than 50% of their income on housing costs. A review from the Kinder Institute for Urban Research found that rental cost increases outpace increases in median household income in the city. The problem has been worsening for the last several years, and the city is actively addressing the shortage by providing tax credits and other incentives for new affordable housing development.
Dallas, Texas
Dallas, Texas, like Houston, is experiencing one of the most severe housing shortages in the country. In fact, with the severe dearth of housing supply in Houston, Dallas and Austin, the State of Texas ranks third in the nation for states with the worst availability of affordable units. Dallas is performing slightly better than Houston, with 17 affordable units for every 100 low-income residents; however, more low-income residents in the city face cost burdens, with 85% of low-income residents paying more than 50% of their income on rent. The Child Action Poverty Lab has estimated that the city needs more than 33,000 units to begin to meet housing needs of the most severely low-income residents.
Orlando, Florida
Orlando, Florida, has been one of the highest growth markets in the nation. Notably, 1,000 people move to Florida every day, and Orlando is one of the top cities for population growth in the state. As a result of the influx of new residents, the city is now experiencing extreme cost burden. The National Low Income Housing Coalition estimates that there are only 18 affordable units for every 100 low-income residents, and, like Dallas, more than 85% of low-income residents are paying more than 50% of their income on rent. More than 55,000 low-income residents are housing challenged, presenting an opportunity for developers to construct more affordable units in the city.
Phoenix, Arizona
Phoenix, Arizona, is a standout for growth markets in the US. Since 2020, the city’s population has grown 4%, and as a result, Phoenix is now the fifth largest city in the country. Unlike other major metros, the city doesn’t have the housing infrastructure to support growth, and the lowest income residents are suffering. The city has only 19 affordable housing units for every 100 residents. As the city continues to attract businesses and jobs, there are increasing questions and concerns about how to house incoming residents. Currently, the city’s estimates call for the construction of 100,000 affordable units to meet current demand.
San Diego, California
San Diego, California, has an all-around housing shortage. The Southern California city has a mere .8% housing availability rate, meaning that people across the socio-economic spectrum are challenged to find a place to live. In the affordable sector, there are only 20 affordable units for every 100 residents. The city has a mandated goal to build 108,000 units by 2029, including nearly 45,000 low-income and very low-income units. Unfortunately, it is nowhere near meeting that goal. To date, the city has only approved plans for less than 1.6% low-income units and less than 1.5% very low-income units.
Building affordable housing is never an easy task. It requires a dense capital stack and experience navigating through tax credits and policy incentives. Often, it is all too-easy to break an affordable deal—and yet, demand for new affordable housing is at record levels. With modern real estate development software like Northspyre, developers can meet the high demand for affordable housing and complete profitable deals. Northspyre streamlines your project management across the development lifecycle, tracking spending, project budgets, financials, vendors, contracts and schedules, and using automation, machine learning and predictive analytics to create valuable efficiencies in a project. On an affordable housing project, it can be the key to getting across the finish line.