Two-Thirds of Partially-Affordable Housing Is Built in Desirable Areas

Location is one of the strongest indicators of housing quality, because it determines the quality of education, jobs and opportunities to which residents have access. According to Harvard University research, where we grow up will leave a deep imprint on us and will influence where we end up later in life. Living in a desirable area means access to higher quality schools, good jobs, more opportunities and the ability to move upwards socially. And the opposite is equally true – living in a struggling neighborhood means lower quality schools, lack of good jobs and fewer opportunities.

In September 2016, The Boston Globe ran an extensive article on the uneven geographical distribution of affordable housing in the Boston area, calling it “subsidized segregation.” The Globe investigation found that 79% of Eastern Massachusetts’ affordable housing projects are located in moderate and low-opportunity neighborhoods.

Is the state of affordable housing in Eastern Massachusetts isolated or is it representative of the entire country? Where are future affordable housing developments being built? We teamed up with our sister company Yardi Matrix to find the answers to these questions.

Existing affordable housing is split 58%-42% between low-opportunity and high-opportunity areas

For this study, we analyzed the location of affordable housing in the United States using apartment data from research firm Yardi Matrix, who keeps track of large-scale multifamily properties in 125 U.S. markets. Yardi Matrix uses letter-ratings (A-D) to rate the location of each property based on a set of criteria including employment sources, median household income, quality of jobs in the area, neighborhood environment, area direction of change, crime risk, ease of access, and proximity to shopping/entertainment facilities.

For the sake of simplicity, we sometimes refer to locations with ratings A or B as average and above-average or high-opportunity neighborhoods and to locations with ratings C or D as below-average or low-opportunity neighborhoods.

Based on our methodology, in the Boston metro area, 71% of all affordable housing is located in average and above average locations (A or B-rated) and 29% in below-average locations (C or D-rated). Our methodology is different than Globe’s in that we consider B-rated locations (roughly described as locations with a good concentration of employment nearby and with middle-income households) as good (or average) locations. (Also see the methodology section below for how we define the “Boston metro area.”)

Actually, Boston does well in this regard when compared to the rest of the country. At the national level, only 42% of the existing U.S. stock of affordable apartments is located in high-opportunity locations (A and B-rated) and 58% is located in low-opportunity neighborhoods (C and D-rated locations). But the overall location quality of affordable housing projects is improving. 55% of all new affordable units under construction are being built in locations rated A or B and only 45% in locations rated C or D. These numbers include both completed and under construction projects, nationwide.

More subsidized units are located in partially-affordable buildings than ever before

Our research also suggests that a new direction is taking shape that might benefit the affordable housing industry: an increasingly higher percentage of affordable apartments are now located in partially-affordable developments. For instance, in 2011 only 10% of all affordable units in the U.S. were located in partially-affordable buildings. That percentage has been creeping up since then, such that in 2016, 28% of all affordable units completed were in partially-affordable complexes.

Though the number of affordable apartments in partially-affordable buildings is still just a fraction of that in fully-affordable buildings, the trend is a positive one. Here’s why:

Partially-affordable buildings are more likely to be found in good neighborhoods

At the national level

Comparing partially-affordable vs fully-affordable developments 

If low-opportunity neighborhoods used to be the norm for low-income housing, partially-affordable buildings are starting to change that pattern. Data shows that these types of properties are more likely to be found in good neighborhoods than fully-affordable ones. Close to 60% of affordable units that are part of a partially-affordable building are in average and above-average locations (A and B-rated), while only 40% of units in fully-affordable buildings are in A-rated or B-rated locations. These numbers include both units completed and units under construction.

Taking a closer look at partially-affordable developments

Judging by what is under construction right now, it appears that even more partially-affordable developments will be found in desirable locations in the near future. The percentage of units in existing partially-affordable buildings in A or B locations is 58%, while in projects under construction is 67%. In other words, two-thirds of new low-income apartments that are part of partially-affordable developments are being built in good or very good locations. 

[bctt tweet=”2/3 of new partially-affordable housing is built in high-opportunity locations. ” username=”RentCafeapts”]

At the metro level:

Comparing partially-affordable vs fully-affordable properties (both existing and under construction): 

Seattle and Detroit are at opposite ends for highest and lowest percentage of units in partially-affordable buildings located in high-opportunity neighborhoods

The good news is that in seven U.S. metros, over 80% of units in partially-affordable buildings are located in average or above-average neighborhoods (locations rated A or B). Those metros are Seattle, WA (96%), Washington DC (95%), Riverside, CA (91%), San Diego (89%), San Francisco (86%), Los Angeles (86%), and Boston (84%). In the Denver, Minneapolis, Houston, Dallas, Miami, New York and Tampa metro areas, between 50-80% of partially-affordable buildings are in locations with ratings A or B. In Chicago 48% are in A or B-rated locations. The worst metros are Philadelphia (39%), Phoenix (38%), Atlanta (37%), St. Louis (29%) and Detroit (27%). These numbers include both units completed and units under construction.

Comparing partially-affordable developments completed vs under construction: 

Denver has most units in partially-affordable buildings in prime (A-rated) locations; Detroit, Phoenix, St. Louis have none

The graph above shows that in Denver 47% of existing partially-affordable housing is in the very best locations (A-rated), and 100% of what’s under construction is also in A-rated locations. Many of Denver’s partially-affordable developments are concentrated in the Central Business District/Five Points/North Capitol Hill area, like Villages at Curtis Park on 27th Street, a community with 233 affordable apartments out of 323, in a great neighborhood, close to schools, parks and stores.

Other metros in the top for most partially-affordable apartment buildings in A-rated neighborhoods are Washington, DC (40%), Boston, MA (33%), and San Diego, CA (32%). At the other end of the spectrum are Phoenix, St. Louis, and Detroit with zero partially-affordable buildings in A-rated locations.

Building low-income housing in good neighborhoods means building stronger, more inclusive communities. Partially-affordable projects are an unobtrusive way of bringing low-income apartments into well-to-do urban and suburban areas, whether the buildings are 10% or 75% affordable. Though they may not be a perfect or even permanent solution to affordable housing, for low-income residents they represent a chance to live in a safe neighborhood with a good school, or a thriving community with good jobs and opportunities within reach.

Methodology:

• Research compiled by RentCafe using affordable housing data at the national and metro level from sister company Yardi Matrix. Data includes only multi-family properties with 50+ units.

• The term “affordable housing” as defined by Yardi Matrix includes affordable properties that have two conditions in common: some form of government subsidy attached to property tax advantages or favorable financing; and certain income standards that households must meet. The term “affordable”, as it applies to apartment communities, imposes the restriction that households of low-income status (below the median metropolitan area household income) must occupy all, or a part of, a property. The household income determining a resident’s eligibility for meeting low-income definitions varies by household size and from property-to-property. Property-to-property variances reflect guideline variances imposed from program-to-program, or within the same program based on timing of when affordable tax incentives were authorized. An affordable property can be of two types: rent-capped (imposes a rental rate ceiling by unit type) or subsidized (provides a household rent government subsidy).

• Location ratings are defined here. 

• The Boston Metro Area apartment market includes municipalities: Boston, Cambridge and Quincy, Massachusetts counties Essex, Middlesex, Norfolk, Plymouth, Suffolk, and New Hampshire counties Hillsborough, Rockingham, Strafford.