Defining Market-Rate Housing
Market-rate housing refers to non-subsidized properties that are rented or owned by those who pay market-rate rents or who paid market value to purchase the property. Unlike subsidized affordable housing, market-rate housing does not confer special government benefits.
The State of Market-Rate Housing
The sharp interest rate hikes over the past year continue to impact housing markets and affordability for both homeowners and renters across the U.S. According to the Joint Center for Housing Studies of Havard University, housing costs remain well above pre-pandemic levels thanks to the substantial increases over the last few years. Since the beginning of 2020, asking rents in the professionally managed sector are up by 24 percent. The 2023 State of Nation’s Housing report, from the Joint Center for Housing Studies of Havard University, highlights that while single-family housing construction has declined since 2022, multifamily construction has continued to rise even as rental demand softened. The 2023 State of Nation’s Housing report also highlights nearly 1 million multifamily units were under construction in early 2023, the highest rate in almost 50 years. However, rising vacancy rates, along with higher interest rates and tighter lending standards, suggest a forthcoming slowdown in multifamily construction.
How Can Market-Rate Housing Help Preserve Affordable Rents?
Many long-standing residents of communities are apprehensive to support new housing development in fear that new development will raise market rents in the area. Research suggests that the development of new market-rate housing causes rents in nearby buildings to fall rather than rise. Despite common concerns, the development of market-rate housing should be assumed to complement rather than undermine other affordability and economic empowerment strategies. If market-rate housing lowers nearby rents, it can help stabilize property values so that affordable housing construction and acquisition is less costly.
How Can Cities Develop More Housing?
There are many sectors and stakeholders involved in the production of new housing. Solutions to help meet the demand of new housing must address the regulatory barriers to building housing, as well incentivizing the financing and construction housing through various programs. Cities could consider:
- Leveraging public-private partnerships to facilitate further housing development. Private partners, especially large regional employers, can aid in the financing of new housing development to house an expanding workforce.
- Evaluating their land use and regulations to provide a variety of housing options. Implementing land use and regulatory changes that encourage the development of higher density mixed-use areas can help diversify the types of housing available to the community.
- Developing construction workforce support programs to incentivize community members to enter housing-related trades. Boosting the construction workforce will increase local capacity to build enough housing units to satisfy demand.
- Incentivizing first-time homebuyers and facilitating the home-buying process by bolstering down payment assistance programs. Such programs can help bridge equity gaps in homeownership for minority populations and offer necessary financial support to homebuyers.
Program Highlight – Urban Housing Ventures Fund
In 2019, Microsoft launched a commitment of $750 million focused on advancing housing solutions in the Seattle and Puget Sound region, targeted investments of loans and grants for housing development. Such investments include the Washington State housing Finance Commission, the Evergreen Impact Housing Fund, and the King County Housing Authority. As a major employer in the region, Microsoft has leveraged this public-private partnership in hopes to provide more affordable options to meet the demands of the expanding population. The Watershed Apartments in Renton, WA are one of the newest housing projects funded by the Evergreen Impact Housing Fund – part of the Microsoft Urban Housing Ventures Fund.