The higher cost of living, paired with the limited availability of affordable housing options, has made it difficult for lower-income earners to remain in the workforce. As interest rates continue to rise at a rapid rate, the number of rental units that provide businesses and their employees access to affordable workforce housing is at risk. Rising interest rates can have profound impacts on an economy as diverse segments are affected differently due to employment levels, wages, and/or lack of other earned income sources. In this blog post, Jeffrey Hammel discusses how rising interest rates could affect affordable workforce housing in both rural and urban areas around the country.
Jeffrey Hammel On How The Rising Interest Rates Could Affect Affordable Workforce Housing
The rising interest rates could have a great impact on affordable workforce housing, says Jeffrey Hammel. As interest rates increase, the cost of borrowing money to purchase a house or rent an apartment increases as well. This can be especially problematic for low-income households who are already living paycheck-to-paycheck and don’t have enough financial cushion to cover higher rent payments.
When banks charge higher interest rates, it is more expensive for developers to finance construction and rehab projects for affordable housing units. According to Jeffrey Hammel, this leaves fewer resources available to preserve existing units and build new ones, in turn making fewer homes available at an affordable cost. Additionally, when rental prices go up, lower-income households may lose access to quality housing due to their inability to pay the higher rent.
Data from the National Low Income Housing Coalition revealed that in 2018, a full-time worker earning minimum wage would need to work more than two jobs just to afford a one-bedroom apartment at fair market rent. Furthermore, the Joint Center for Housing Studies of Harvard University reported that 30 million households are cost-burdened and spend more than 30% of their income on housing costs, while 8 million households pay over 50%. This shows how unaffordable many rental properties already are.
Data number statistics:
- In 2018, a full-time worker earning minimum wage would need to work more than two jobs just to afford a one-bedroom apartment at fair market rent (National Low Income Housing Coalition).
- 30 million households are cost-burdened and spend more than 30% of their income on housing costs (Joint Center for Housing Studies of Harvard University).
- 8 million households pay over 50% of their income on housing costs (Joint Center for Housing Studies of Harvard University).
Jeffrey Hammel’s Concluding Thoughts
Given these numbers, it is clear, as per Jeffrey Hammel, that rising interest rates could have a big impact on affordable workforce housing. Without adequate resources to keep current units affordable or build new ones, lower-income individuals and families will be unable to find quality and affordable housing. It is important to take steps to prevent the worsening of this already problematic situation so that all individuals and families have access to safe and affordable housing.