Rental market boom hinders housing nonprofits

Credit: File

Credit: File

Metro Atlanta housing nonprofits are feeling unprecedented constraints as rent prices and demand for affordable housing continue to rise.

According to data from Zillow, the “typical observed market rate rent” for all homes and apartments in Atlanta was $1,886 per month in March. That marks a more than $300 increase since March 2021 and a more than $400 jump since March 2020.

“I don’t think anyone would have predicted that in the middle of a two-year pandemic we would have had this much growth and development in the real estate market,” said Matt Hurd, executive director of Open Doors Atlanta, an organization working to connect landlords with affordable housing groups.

Market mismatch

Despite rising prices, fair market rents in the metro area for 2022 – set based on ZIP code by the U.S. Department of Housing and Urban Development – consistently fall short of average rent prices.

Several HUD-funded programs have rent ceilings and subsidy ceilings based on fair market rents. These include housing choice vouchers, emergency solutions grants and public housing flat rents.

For example, a nonprofit working to house a family with a HUD emergency solutions grant could only pay for a lease at or below the fair market rent.

Cathryn Vassell, CEO of Partners for Home Atlanta, said a 20-30% rent increase in the last six months created the mismatch. While the increase affects consumers, it also limits some groups working with federal funds to assist families experiencing homelessness.

“The highest (fair market rent) I want to say is like $1,600-$1,700, which is nearly impossible to find here,” said Melanie Kagan, executive director of Cobb County’s The Center for Family Resources.

The Center is the liaison between the federal government and the Marietta/Cobb Continuum of Care. The group manages HUD funds earmarked for housing assistance and homelessness prevention, helping the money get to six partnered organizations in the county.

All of the continuum’s housing programs, Kagan said, have fair market rent restrictions. A now-lapsed waiver issued in response to COVID-19 helped. But she said average wait times for housing through The Center increased from about six weeks to more than two months from pre-pandemic to 2021.

That creates an enormous hurdle for people experiencing homelessness.

“Not all of them can wait for 72 days,” Kagan said. “So sometimes we’ll lose people in the process because they have to go somewhere else.”

A further struggle is finding housing that will be sustainable once assistance ends. The Center’s rapid re-housing program helps cover rent and utilities for up to 12 months.

If a family leaves the program and they can no longer afford the rent, “then we’ve literally set them up for failure,” Kagan said.

Other rental woes

Fair market rents are a barrier, both because they cover entire ZIP codes and because they update annually. But supply and demand is another issue housing groups face.

Hurd said up to 96% of metro Atlanta’s affordable housing market is at capacity. And when units become available, he said, some landlords take the time to renovate and re-list the unit at the inflated market price.

Unit flipping, heightened landlord turnover and reduced eviction during the pandemic caused prices to soar and the availability of affordable units to decline.

Vassell pointed toward the previous success of Partners for Home’s work with Hurd’s organization as evidence of fast-moving market changes. She said they housed around 800 households over six months starting at the end of 2020. Since then, they haven’t met their goal of 300.

“We’re nowhere near the target,” Vassell said. “Which, again, is very different from where we were this time last year.”

It’s also become more difficult to get landlords to sign on.

Kagan said property management and investment companies have scooped up available real estate when private landlords divest. This leads to more flipping and complicates the leasing agreement process for the clients of nonprofits.

Past evictions, credit scores and income are the main factors determining lease eligibility. The regulated approval processes of large companies don’t provide much leeway.

“It’s not a person that’s looking at it — it’s just a computer that spits out a score and says yes or no,” Kagan said. “And our local representatives don’t always have authority to override that. And so, you know, it gets challenging.”

In addition, it can take longer to reach a lease agreement through a housing group than on the open market.

Securing affordable leases for clients using housing choice vouchers, for example, requires the landlord to get approved by the public housing authority. Vassell said paperwork and inspections bog down the process.

Partners for Home and other nonprofits offer guaranteed rent each month, but that key incentive is sometimes not enough to override a speedier process in a high-demand market, Vassell said.

Hurd said he hopes to see real estate partners work with Open Doors and other nonprofits to make affordable units available now. In other markets, he said, when growth becomes unsustainable, measures such as rent control “alienate the real estate community.”

“We want to be part of the solution before that happens,” Hurd said. “So, that’s kind of our message.”


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