It is impossible to live in the DMV and not be aware of the cost of housing. I have lived in Northern Virginia since 1996, and I have watched apartment rental rates, and other housing costs, rise at a significantly faster rate than incomes. The apartment I rented in my second year out of college cost me 25% of my gross income. That same apartment today costs 70% more than it did 15 years ago, yet incomes for professionals at the same level are certainly not 70% higher.
Housing costs are even more dramatic when you think about minimum wage workers. A full-time worker (40 hours) paid minimum wage makes just over $15,000 a year. A quick search on Apartments.com for a 1-bedroom in Alexandria currently reports the lowest rent at just over $1,000 a month. It’s not hard to figure out that $12,000 annual rent (before any other costs are considered) is simply not affordable to someone not just working at minimum wage. It’s not affordable to anyone whose annual salary is under $40,000 a year.
Should this matter to a business owner? Why shouldn’t we just leave it to the market to figure out where someone can afford to live?
1. Affordable Housing Can Actually Improve Property Values
It’s a long-dispelled myth that affordable housing will bring down neighboring property values. But many people don’t know that, in many cases, affordable housing can actually increase property values. One report found that context is everything. In areas where affordable housing developments replaced vacant or depressed properties, the new developments can be economically beneficial because new high quality construction can complement surrounding neighborhoods. The dispersal of affordable housing amidst market rate housing has also been found to be a positive factor.
This same report also linked good property management to better outcomes. It identified one study that found non-profit builders to have been historically better property managers of affordable housing developments than for-profit developers or public housing authorities because they better understand the needs of both the clients and the neighboring community.
2. Higher Density Areas Have Lower Infrastructure Costs
Economies of scale come into play when it comes to the costs for necessary infrastructure investment. Another myth about affordable housing and multifamily residential development is that it will further burden already strained local government budgets. However, a report from California found:
- New construction of multifamily residential units can take advantage of the economies of scale in building telecommunication lines, sewer facilities, and even roads, leading to an overall lower investment cost per unit.
- Infill development can optimize infrastructure and public services, which may not have been at capacity.
The Urban Land Institute reports that $100 billion dollars in infrastructure investment could be saved over the next 25 years if community planning included more high-density development.
3. Time Spent Commuting Impacts Employee Productivity
It should be a no-brainer, but the longer an employee must spend commuting to and from work, the more likely they are to:
- Be late,
- Be absent,
- Be less engaged at work,
- Make mistakes, and
- Impact others’ morale.
Workers who spend less time and money commuting can also spend more time on education and training, increasing their job skills, benefiting both employee and employer. It simply is in the best economic interest of a business for employees to be able to afford to live near their workplace.
4. Affordable Housing Promotes Economic Growth
It is simple common sense that says that for every extra dollar in a resident’s pocket that doesn’t have to be spent on housing, that is one extra dollar that they can spend on other goods and services in the community, benefiting small businesses particularly. We have often touted the 30 percent rule when it comes to budgeting for housing costs.
However, studies have shown that a sliding scale should be used, and that the lower a household’s income, the smaller the proportion they should spend on housing, freeing them up to not only have more dollars for their other needs, but also giving them a chance to save and improve their long-term economic conditions.
“Not In My Back Yard” (NIMBY) syndrome is a public perception barrier that often impedes quality affordable housing development plans. Yet story after story, like Mount Laurel, New Jersey, has found that when affordable housing developments are planned for and managed in a way that benefits low-income residents and blends in with the local community, it becomes a win-win for everyone. The community and local businesses benefit from increased diversity, potentially higher property values and economic growth, while poor and working-class families receive a real opportunity to lift themselves out of a cycle of poverty.