Q1 2020 National Affordable Housing Quarterly View

An Analysis by Mary Le

VACANCY RATES STAY TIGHT

The affordable housing sector, which is comprised of Low Income Housing Tax Credit (LIHTC), saw no change in vacancy this quarter despite over 6,000 new units opening their doors. There was no movement on the vacancy side which lingered at 2.4%, that is half of the level for market rate rentals. It has remained stable throughout 2019 into the first quarter of 2020, with only a small 10 basis point increase two quarters ago from 2.3% to 2.4%. Since REIS began tracking this sector, the vacancy rate has remained within the range of 1.9% to the current 2.4%. In the foreseeable future, we expect this rate to stay within this tight range.

 

Affordable Housing Vacancy & Rent Growth

Source: Moody’s Analytics REIS

 

Inventory grew by 0.6% this quarter, while net absorption remains within the 5,000 and 10,000 range. It is important to note that this has never been negative. Accordingly, the vacancy rate continues to be low and steady. Construction in the affordable housing sector is taking place at a fairly standard rate because it is considered essential and so, there have been limited delays. This slight downtick in construction is due primarily to the supply shortages, permit and inspection interruptions triggered by the emergency order of the COVID-19 quarantine. We assume that some projects that were expected to be completed at the end of the year will be pushed back to the start of 2021. In spite of this, demand is likely to keep occupancies stable throughout this crisis. Affordable housing is arguably the strongest and most consistent of all property types, with demand consistently outpacing supply, this sector will likely remain robust…

 

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Mary Le is an Economist at Moody’s Analytics REIS.

 

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