The problem fueling the essential housing crisis and how to fix it

CHARLOTTE, N.C. (WBTV) - It has been a tough 18 months for a lot of people. The COVID-19 pandemic has been a global health crisis. For many, it has also triggered an economic one.

We are talking the day-to-day stuff: food and a roof over your head. The pandemic has exacerbated and highlighted problems that were going on long before we ever heard the word COVID-19. One of those, is the cost of housing.

“I think affordable housing is very hard in Charlotte. There is a lot of people struggling. The cost of living is very high,” says Jakilah Smith, “It’s frustrating to find somewhere to live because you have to have somewhere to live, of course. If you don’t make enough money, where you going to go? Can’t live on the streets. Can’t live in your car.”

We’ve talked a lot about affordable housing. Typically, this is for people who make about 60 percent of the area’s median income. In Mecklenburg County that would be about 38-thousand dollars a year.

There’s another group of people struggling to make ends meet: working professionals just starting their careers.

A lot of Millennials and Gen Zers fall into this category. Right now, more than half of 18–29-year-olds are living with their parents. They simply couldn’t afford their rent.

“I know about half my friends are living with their parents or had to give up their apartments because they don’t know how they’re going to pay rent next month,” Ellen Goldberg says. She moved back in with her parents during the pandemic.

“You are a complete independent adult, had a career you were really proud of, and an apartment you were proud of, and then it’s all whisked away in a matter of days.”

According to the Turner Building Cost Index, 80 percent of Millennials earn $50,000 or less a year. Nationally, the average monthly rent is $1,474. When you factor in taxes... somewhere around half of their monthly pay is going toward rent. That’s considered cost-burdened.

“They haven’t even formed families in many cases. So, they’re looking more for one, and in some cases, two-bedroom unit floor plan types...and they really need to be close to major job centers and close to major urban amenities.”

Last year, the Mecklenburg County State of Housing Report highlighted this as a growing problem. Here’s a graph showing the percentage of households that were cost burdened each year.

The number of people making between $35,000 and about $50,000 a year - who are cost-burdened - has more than doubled since 2010.

That’s where the term “Essential Housing” comes in. It’s that in-between. You have luxury housing on one end and affordable housing on the other.

It’s a term for people making between 60 percent and 140 percent of the area’s median income. In Mecklenburg that’s roughly between $40,000 and $90,000 year. They don’t qualify for subsidized housing, and they can’t afford the luxury stuff. It can be hard to find that something in the middle.

Developers are looking for ways to meet the rising demand for housing in this Essential Housing category. It can be difficult in a city like Charlotte. We’re growing fast, and land values are skyrocketing.

So, developers say they’re looking for ways to keep construction costs down.

Todd Williams is the Chief Investment Officer at Grubb Properties. One of their buildings is Link Apartments Montford. It’s an area of town where rents can average more than $1,500 a month. Link units can be a couple hundred dollars cheaper than that.

Williams says they are trying a couple things to keep construction costs and, as a result, rents down. One is to simplify floor plan offerings. Instead of 15 different layouts in a building - there might be 6.

“We think of it as design efficiency,” he says, “That allows our development teams and construction teams to be more efficient about how they construct and build these, which saves cost and reduces time. Then we can deliver rents that are anywhere from $150 to $600 or $700 a month lower than our peers.”

Another focus is on parking. Williams says building a parking garage can cost $25,000 to $50,000 per unit. It’s why they’ve focused on creative ways to offer parking.

“Link Apartments Montford has a parking garage that’s shared with a next-door office building. That works exceptionally well, because the office can charge during the day, and the multifamily apartments can park during the evening. That’s actually saving us about $6 million of upfront capital cost to the cost of our housing project, we could pass that benefit on to the residents in the form of lower rents.”

But finding those places to save money, also means cutting some of the amenities a luxury apartment may typically have.

“We’ve said look, let’s focus on the amenities that really matter that make a difference in their life. And so, if not owning a vehicle allows them to afford a location closer to jobs and closer to amenities and closer to transit, then let’s create amenities that cater to help that. So, one of those, for example, are our cycle centers. Cycle centers are effectively bicycle storage facilities. on steroids. We’ve really pumped up the volume in our cycle rooms not only to add additional space, but to add all sorts of additional amenities for the bicycling resident.”

So, has it worked? Grubb Properties says in 2020, its properties maintained high occupancy rates. According to Yardi Matrix, rent collections in the southeastern U.S. were around 94.8%. For Grubb, rent collections were above 98% every month.

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