Liana Silva, a public school teacher, had a running joke with friends during last year’s mayoral election: If she ever ran for the position, her platform would focus on affordable housing for teachers.
“I feel like it should move beyond the joke stage and a candidate should officially take it up,” she said this week during her lunch break at Cesar Chavez High School, where she teachers 12th grade English. “Housing is getting more and more expensive.”
Silva, a single mom who lives with her fourth-grade daughter at friend’s house in the greater East End, is among the countless Houstonians who struggle to find housing they can afford. These include public school teachers, hospital workers and early-career police officers and firefighters who make too much to qualify for rental assistance but not enough to afford apartments or homes without roommates or in neighborhoods near their jobs.
Houston’s struggles with housing affordability worsened as the city’s economy boomed in the years following great recession. But its problems have been overshadowed by those of higher-priced markets where the affordability crisis has become so acute that major employers are grappling with their role in finding a solution.
In Silicon Valley, Google, Facebook and Apple have pledged at least $1 billion each to build affordable housing. In Denver, one hospital has begun building housing for both low-income employees and homeless patients. In the Permian Basin, officials in New Mexico have suggested building housing specifically for teachers and their families in Carlsbad, where the fracking boom has led to a housing shortage.
Houston, long trumpeted for its affordable housing costs, has not been immune from the squeeze. According to Zillow, the median rent for a Houston-area apartment would take up 44 percent of a starting teacher’s salary, well above the rule of thumb recommending households spend no more than a third of their incomes on housing. The starting salary for a teacher in the Houston Independent School District is $54,369 annually.
“As home price growth outstrips wage growth, occupations such as teachers, first responders and restaurant workers struggle to afford to live in the communities they serve,” real estate listing company Trulia wrote in a recent report about housing costs.
Silva would like to own her own home on the east side, but prices are rising quickly and she’s not ready to buy. She knows the suburbs are an option but dreads the idea of a long commute. When she took her teaching job in 2016 she was living on the west side of town and it took her 45 minutes to get to work in the morning and sometimes more than an hour and a half to get home at night.
“As a single parent, it was a quality of life issue,” Silva said. “I was picking up my daughter at 6 p.m. Everybody was cranky and tired. It was a hard year.
To landlords catering to working Houstonians with moderate incomes, residents like Silva are hot prospects.
The owner of the Hammerly Oaks apartment complex in Spring Branch recently started offering a 5 percent discount to teachers, nurses, police officers, firefighters, students and veterans. The promotion could amount to more than $550 per year for a two-bedroom unit.
Renters aren’t the only ones to benefit.
“From an apartment owner standpoint, you want to pull in a good quality resident. Those people have good, stable jobs, so it’s a win for both sides,” Bruce McClenny, president of Houston-based ApartmentData.com.
While Houston has a generous supply of so-called Class C apartments — generally considered to be properties built within the last 30 years with limited amenities and original appliances and fixtures — demand for these units has risen, especially in urban neighborhoods where developers have demolished older, more affordable complexes for new, upscale buildings.
For example, in the urban area encompassing Montrose, the Heights and Highland Village, renters paid an average of $1.71 per square foot per month, 45 percent more than the overall Houston average, according to fourth-quarter data from the commercial real estate firm CBRE. In such neighborhoods, affordable apartment complexes are growing harder to find.
The dynamic has led investors to buy portfolios of aging apartments with low rents, betting that the demand for such housing will outpace supply. Many are renovating those properties and raising rents.
To understand the powerful boost renovations can have on rents, just look across the street from Hammerly Oaks, the apartment complex with the discount for educators and first responders built in 1983. There you’ll find Zocalo, a two-story complex built in 1978. But while Zocalo is older than its neighbor, it was recently renovated and units rent for as much as $1,325 for a two-bedroom. Hammerly Oaks, on the other hand, charges $625 to $1,050 for one- and two-bedrooms, according to Apartments.com.
“It’s happening every day where companies are buying that type of product and saying we’re going to refurbish it and raise rents $70 to $100,” McClenny said. “It’s better quality housing, but they’re paying more for it.”
While workforce housing can be a sound investment, for Swapnil Agarwal, the owner of Hammerly Oaks, it’s personal. When he moved to Houston from India as a teenager, his family lived in apartments on his father’s blue-collar salary. He launched his business in 2014 specifically to buy and renovate older multifamily complexes with the aim of improving options for families such as his own.
Karya Property Management, which he also runs, operates the buildings. The company now has 66 properties across the country accounting for roughly 20,000 units. In Houston it is offering the 5 percent special at all of its 42 complexes with a combined 12,000 units. The average rent across all of its properties is $850 a month.
Developers take note
Workforce housing has become a hot commodity in part because most multifamily construction has focused on luxury apartments.
While the number of high-end apartments has boomed, the pool of housing considered affordable for workforce housing has shrunk to its lowest level in 20 years nationally, according to Marcus & Millichap, a commercial real estate firm. It expects workforce apartment rents to increase 4.3 percent over 2020, compared with 3.3 percent for higher-end apartments, the company wrote in a multifamily investment forecast released last week.
The focus on luxury, however, is starting to fade.
“Today, investors are not wanting us to build the nicest, most expensive properties,” Stan Levy, chief operating officer of apartment developer Morgan Group, said this week at an annual meeting of the Houston Apartment Association. “What they want is an attractive basis allowing more people to afford the rents.”
The company recently purchased a multifamily property near the Texas Medical Center that it is converting to a mixed-income complex though a program with the Houston Housing Authority. Half of the units will be reserved for people who earn no more than 80 percent of the area median income — or $61,050 for a four-person household.
“We feel like we’re doing something good for the city,” Levy said. “It’s important that people with mid-level incomes can live close to where they work.”
Similar developments adding to Houston’s workforce housing stock are under way.
In the shadow of downtown, where tens of thousands of new units have sprung up in sleek new towers, a Cleveland-based developer recently started construction on a 300-unit complex that will have 50 percent of its units set aside for renters making between 60 percent and 80 percent of the area median income.
“There’s a lot of demographics covered there, but firefighters, teachers, police, city workers, county workers, nurses are really your core workforce group that tends to fall in the 60 to 80 percent range,” Alastair Jenkin, NRP’s vice president of development, said. In Houston, a starting firefighter makes $43,528 a year, 67 percent of Houston’s median household income of $65,394.
NRP has developed low-income housing in Houston with the help of tax credits, but this is its first mixed project, which is also being developed in partnership with the Houston Housing Authority.
Grass greener in Houston
While workforce housing has grown tight in parts of Houston, it could be worse. McClenny of Apartmentdata.com, which tracks market trends in cities throughout the southern United States, said Houston’s workforce housing supply isn’t as low — nor are its units as expensive — as many other markets. In Austin, for example, the average rent for a Class C unit is $1,131. In Houston, it’s $807.
Across the Houston region, workforce apartments make up around 31 percent of the market and have a 9 percent vacancy rate.
“That’s almost 18,500 units that could be occupied at what we would consider an affordable level,” McClenny said.
Class C rents were flat last year, too, while the more expensive Class A and B rents were up 2.3 and 3 percent, respectively.
And Nitya Capital is not the first or only company to offer discounts to public workers. McClenny, whose company also tracks landlord specials and promotions, said just over a third of the 2,830 apartment complexes the company surveys reported offering discounts to teachers, police and fire personnel. Some of those deals though are limited to police officers in exchange for working off-duty shifts at their complex.
While McClenny isn’t overly concerned about a workforce housing shortage for Houston on the whole, he recognizes that it’s gotten harder to find moderately priced housing in neighborhoods close to downtown.
“If you work there and are looking for affordability,” he said, “it’s rare.”