COVID-19 will worsen Charlotte’s affordable housing crisis, putting more in need
CHARLOTTE, N.C. (Charlotte Observer) - Katia Goodman and daughter Ka’Mani wasted no time checking out every corner of their new apartment, ready for a fresh start and a stable home during the uncertainties of the coronavirus pandemic.
They were the first to move into the much anticipated 185-unit Mezzanine at Freedom, developed by the Charlotte-Mecklenburg Housing Partnership. It’s latest affordable housing complex to open in Charlotte, where 129 of the 185 units are for income-qualified renters.
Developers and affordable housing advocates say the COVID-19 economic upheaval, which has 1 million North Carolinians filing for unemployment, will inflame an already dire need for affordable housing in Charlotte. But, they say, those same disruptions could make financing and building future projects more challenging.
The lack of affordable housing was already a defining issue in Charlotte, where city data has put the shortage between 24,000 and 34,000 units.
Nearly half of Mecklenburg renters are cost-burdened, according to a 2019 report, meaning they spend more than 30% of their income on housing. Low-income renters are cost-burdened at a higher rate than the overall population, which indicates even a temporary loss of income will be more harmful to their housing security.
That’s why moving into the new two-bedroom unit was an enormous relief, Goodman said, as they hauled the first of their belongings upstairs while wearing masks for protection.
The warm afternoon was a stark contrast from the drizzly January morning when applications for the Mezzanine opened.
An estimated 1,000 people waited for 129 affordable units in a line that snaked around the parking lot, a striking visualization of the city’s dire need for housing. Goodman showed up at 11 p.m. the night before and slept in the car to ensure a spot in line.
She worried, when they briefly left so her pregnant cousin could use the bathroom at a nearby gas station, that they’d lost their chance.
“I was overly excited,” said Goodman, 29, when she learned her family had been approved.
They had been staying with family after Goodman fell behind on rent at a previous apartment, and she worried about finding another. Goodman drives school buses, so she hasn’t been able to work for weeks. Eight-year-old Ka’Mani is keeping busy with online learning.
This is the first time Ka’Mani had her own room in years, before she could remember. She twirled around the space, already deciding how she’d arrange her shoes and clothes in the closet.
The Housing Partnership began moving one tenant per day at the Mezzanine right now, so families can keep a safe distance.
Opening the doors now with extra pandemic precautions, embodies the need for affordable housing in Charlotte and challenges going forward, said Julie Porter, president of the Charlotte-Mecklenburg Housing Partnership.
“This is coming along at a perfect time,” Porter said. “There’s going to be a gigantic demand and the more units that we can provide, the better.”
While limitations on gatherings are expected to ease over time, COVID-19 has the potential to affect affordable housing projects at every step of the process, developers say, from securing financing to construction slow-downs.
Financing will have to be “airtight” on affordable housing projects that already have thin margins, Porter said.
“Banks are not going to be in the mood to take a risk right now,” she said.
That means developers would have to find additional gap financing to make up for market volatility, said Connie Staudinger, executive vice president at Horizon Development Properties, the development arm of Inlivian.
“It could overwhelm an already stressed industry,” she said. “Investors and lenders are truly trying to insulate themselves for the unknown.”
For projects that are underway, previously routine tasks like getting signatures notarized or completing inspections in person, have to be modified temporarily for socially distancing.
Construction, deemed essential work during North Carolina’s stay-at-home order, has caused some delays but nothing significant yet, Staudinger and Porter said.
Both said it is too soon to see the full economic effect on an industry where projects can take up to two years to complete through a complex combination of public subsidy, federal tax credits and other financing.
The 2008 financial crisis can offer lessons but it’s an imperfect comparison, said Scott Farmer, executive director of the North Carolina Housing Financial Agency, because that recession was so intrinsically tied to the mortgage and housing markets.
Affordable housing, which because of lower rents tend to have fewer vacancies than market rate and can be seen as a safer investment, fared better during the recession than other commercial construction, Farmer said.
And at least for now, investors’ appetite to buy federal tax credits, often a key component to finance affordable housing projects, hasn’t dropped off as it did during the recession, said Farmer, whose agency awards those tax credits in North Carolina.
The more immediate concern is the number of tenants who suddenly can’t pay rent after a job loss, Farmer said.
More than 24,300 Mecklenburg County residents were unemployed in March, according to federal data, a nearly 12% increase from February. But experts say that number doesn’t capture the full impact of the shutdown, which North Carolina implemented in late March.
In Charlotte, United Way of Central Carolinas began working with three affordable housing providers, including the Housing Partnership, to direct temporary rent relief to tenants who have an income disruption due to the pandemic. Porter, of the Housing Partnership, said it is expected to expand to additional affordable housing providers.
In the first wave of the program, about 10% of eligible tenants applied for relief, Porter said. She expects that need to grow.
Farmer, too, said he will be watching to see what federal resources are made available, including rent and mortgage assistance.
“We need to make sure that our elected officials understand (the importance of affordable housing) and keep pushing for those resources to come this way,” he said. “This is going to be a slow recovery but housing is absolutely going to be part of that recovery.”