Are Demand and Rising Prices Encouraging New Protections?
April is Fair Housing month and this April it’s a 50-year celebration of the integral Fair Housing Act of 1968. In essence, this law and our compliance ensures that anyone who can afford and meet our reasonable business criteria should be able to live in and enjoy our properties without discrimination. This is a very good thing!
At the same time this spring, we have to recognize that occupancies and rental rate growth are at some of their highest levels in a long time. ALN Data reports that in the Fort Worth area in February average occupancy stands at 91.3%, down slightly from the previous year and rents average $1,028, up 5.5% from the previous year. It now costs an average of $1,134 to rent a two-bedroom unit in the Fort Worth MSA. This is nothing compared to a major metro market like Seattle or L.A. where rents average $1,666 to $2,104 and availability is nil (95% occupancy and unchanged from the previous year). With an occupancy standard of two persons per bedroom in Seattle, a family of five has to rent a two-bedroom apartment which they may not be able to afford.
What does that mean? Those situations have gotten the attention of tenant advocacy groups that are driving legislation to file suit against the old standard and suggest a standard more aligned with building codes which would allow one person for every 75 square feet of living space. That may mean that 6 or 7 people can occupy a one-bedroom unit – much easier on my monthly budget!
Already an Indianapolis-based regional operator of 8,000 units has been charged with using an “overly restrictive” occupancy standard of two persons per bedroom because it disparately impacts families. The charge alleges that a more reasonable standard would be a health code standard issued by the various municipalities. In Indianapolis, the occupancy standard per code is 2 persons in 250 square feet. In a sleeping room, it would need to be 70 square feet for the first sleeper and 50 square feet for each additional occupant
In California, a late 2016 Government Affairs Alert was sent from NAA letting the membership know that a significant change to the state law was in the works. While the law did not pass in 2017, but the sense is this will move forward this year. It would allow up to 6 people in a one bedroom, 9 people in a two bedroom and 15 people in a three bedroom. A new child added to the household would not be counted for the purposes of occupants.
Are rents and occupancies the triggers that are drawing attention to occupancy standards? In Seattle, I have to earn over $55,000 to afford a one-bedroom unit. If I have a family that pushes me to a two and that salary would need to be over $63,000. In L.A. its almost $69,000 and $83,000 respectively. In good old Fort Worth, its literally half of the L.A. number.
Rents and occupancies are due for some correction soon and that may slow down the tide of rising occupancy standards, but let’s not expect it to go away. With the lack of affordable housing in the U.S., the Harvard Joint Center for Housing Studies in its 2017 report concludes that nearly half of the renter households are cost-burdened. The unsettling change now is that 83% of low -income households fall into that definition, but now half of those earning $30-45K are cost-burdened and 23% of those earning $45k-$75k are cost-burdened.
So fair housing is all about equal access and enjoyment of rental housing. But if housing is priced out of a reasonable price, the rules about that access may have to change for good. Stay up to date on this topic as changing protections become more and more challenging.
Susan Weston, Alpha-Barnes Real Estate, is an experienced multifamily practitioner, educator and presenter. For any questions about this article, contact her at email@example.com