An Analysis by Mary Le
VACANCY RATES REMAIN TIGHT
The national vacancy rate for the affordable housing sector, which is comprised of Low Income Housing Tax Credit (LIHTC) markets, improved in the second quarter, falling by 10 basis points to 2.4%, but up from 2.3% from a year ago. Since Moody’s Analytics REIS began tracking this sector, the vacancy rate has remained within the range of 1.9% to 2.5%. It is expected to remain flat and finish at 2.4%, which reflects projections in previous forecasts.
Affordable Housing Vacancy & Rent Growth
Source: Moody’s Analytics REIS
The affordable housing sector saw an inventory growth of 0.5%, compared to a growth of 0.9% from a year ago. National rent growth finished at 0.1% this quarter, leaving the midyear rent growth at 0.7%. It is projected to increase slightly to $952, with an implied growth of 0.3% to finish 2020 at 1.0%. The completions figure of approximately 5,700 units was lower than the quarterly average of nearly 7,900 units over the past year; this was the lowest since the third quarter of 2016. Construction in this sector has continued with little to no effect in terms of project cancellation and delays due to the pandemic. During the months of March to May, even while many areas of construction were considered as temporarily nonessential, affordable housing construction continued. It is essential to note that an affordable housing shortage has been a major issue that predates the pandemic, thus the constant supply and demand imbalance for this sector reinforces the critical need for affordable housing across the country. Accordingly, this sector appears mostly unaffected by COVID-19.
Mary Le is an Economist within the commercial real estate division of Moody’s Analytics.