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Maintaining Middle-Income Housing Supply

Much of the discussion about housing trends of late has focused on the highs and lows. On the upper end of things, home prices are booming [1] and not likely to come down soon. Unfortunately, that trend, combined with nationwide housing inventory shortages [2] and increasing rent prices [3], has made things difficult for lower-income consumers. But what about the housing requirements of those who fall between those two extremes? A new California bill is designed to address the needs of the “missing middle.”

California is home to some of the priciest markets [4] in the country, so living in the state as a middle- or lower-income worker can often mean commuting a long way because home prices near your job are unaffordable. First introduced in February 2018 [5] by Assemblyman David Chiu (D-San Francisco) and Assemblyman Ash Kalra (D-San Jose), Assembly Bill 3152 would grant property tax exemptions to nonprofit housing developers who rent homes in high-cost areas to middle-income renters at a discount. The property tax discount is similar to one that already applies to lower-income rental housing.

Assemblyman Chiu told the Santa Cruz Sentinel, “During the housing crisis, middle-income Californians are in a very tough spot. They don’t qualify for low-income affordable housing, but also can’t afford market rents.”

According to the June 2016 California Apartment List Rent Report [6], California rental prices have been trending well above the national average since around May 2015. Nor is it just a California problem. A November 2017 Apartment List study [7] reported that nearly half of U.S. renters are “cost burdened,” spending 30 percent or more of their income on rent. When you factor in the massive student debt [8] many Americans are carrying, the path to homeownership becomes elusive. That begs the question—if there simply isn’t enough rental stock to accommodate demand, where does that leave the middle-income consumer who isn’t ready to purchase a home, or simply doesn’t desire to?

“It’s encouraging to see the California legislature focusing on tax credits intended to help the middle-income renter and not just homeowners,” Beth O’Brien, CEO of CoreVest Finance [9], told DS News. “It’s a clear recognition on how important this segment of the housing stock is to the workforce.  Over time I’d like to see programs like this geared towards a broader group of market participants so that it can have a greater impact on housing investment, but this is a good start.”

Will bills such as California’s Assembly Bill 3152 help ease the pain? Only time will tell.