Housing affordability crisis poised to harm ABQ's economic, social development

Jun. 28—EDITOR'S NOTE — This is the second in a series of stories on Albuquerque's growing housing affordability crisis.

The city of Albuquerque is in the midst of a half-million-dollar recruitment campaign, hoping to lure new and former residents to New Mexico's largest city. Targeted primarily at people living in large American metropolitan areas, the economic development effort highlights what many have long touted as the city's best assets: Clean air. Open space. Diversity. Sunshine. Inexpensive housing.

"Let's talk about cost of living. It's lower here," reads the digital, city-funded Home for Life recruitment campaign. "In Albuquerque, your dream space is waiting for you — and you can actually afford it."

But while Albuquerque homes remain cheaper than many other metropolitan areas, some say the city's claim of affordability is increasingly questionable.

In Albuquerque, a home that sold for $200,000 in early 2019 would have been valued at $244,000 by the beginning of this year based on average local appreciation, according to the Federal Housing Finance Agency calculator.

"Certainly for the working population, or the middle class working population, it's harder and harder to afford a house," said longtime Albuquerque City Councilor Isaac Benton, who has for years advocated for investments in subsidized housing.

Former Albuquerque Mayor Jim Baca, meanwhile, is more blunt.

"All I can say right now is homes are unaffordable," he said.

It's an issue many think should be high on local leaders' priority list — not only because of its impact on the city's economic growth, but because home ownership has positive effects that ripple through the community.

Not only does it help families build wealth, it also fosters social stability, said nonprofit executive Ona Porter, interim CEO of Prosperity Works.

"For people who own their own homes, their kids do better in school and they're more connected and involved in their community, which makes the community safer and more viable," said Porter, whose organization focuses on improving economic mobility of lower-income populations.

As the city spends money trying to attract new residents, opinions vary about whether local leaders are taking the current situation seriously enough, or what, if anything, they should or even can be doing to address it.

The city already offers a range of housing assistance programs, including rental and down payment aid.

But Elena Gonzales of Homewise, a community development financial institution that administers $1 million in down payment assistance for the city, said she does not think the city has emphasized home ownership enough.

She said she would like to see Albuquerque employ a "comprehensive" housing strategy that would "equal out the importance of homeless programs to transitional living programs, to low-income rental, market rate rental and homeownership programs."

"We all have to work together to help people get ahead," Gonzales said in an email. "Home ownership provides that road to stability and wealth building that is so important."

Looming crisis

What's happening in the Albuquerque housing market is not unique.

As a new report from Harvard University's Joint Center for Housing Studies notes, 85 of 100 large metro areas tracked by the FHFA saw double-digit percentage price increases in just the past year. JCHS researchers attribute it to a confluence of factors — low interest rates and a wave of millennial buyers entering the market combined with a limited supply of properties due in part to years of weak new-home production.

At 13.1% year-over-year growth, Albuquerque saw prices climb less than many other markets tracked by the FHFA, but "it's historically very high still," said Daniel McCue, a lead author on the JCHS' latest "State of the Nation's Housing" report.

While most of the country is grappling with similar housing market trends, one local real estate broker who specializes in the apartment industry said the issue could become increasingly pronounced in Albuquerque.

Todd Clarke said Albuquerque is not yet unaffordable — especially relative to other cities — but that it is facing a looming crisis because the already limited housing supply will prove even more insufficient as thousands of new jobs come online. He estimates the jobs already in the pipeline at places like Amazon, Intel and Netflix — some of which have a multiplier effect — will require 29,056 more single-family homes and apartment units.

Failure to address the shortage could not only lead to continued price increases but also potentially thwart ongoing economic growth. He sees the metro's shrunken construction workforce as a key problem local leaders should be trying to resolve.

"A year from now ... we'll say, 'What company did we lose because we didn't providing housing for them?' " Clarke said.

Policy impacts

McCue said there are ways local policy-makers can exert influence. That includes through zoning, like enabling greater density and allowing, for example, more accessory dwelling units on properties.

Baca is a vocal advocate for denser development, saying the city should encourage the types of high-rise condominiums emerging in other cities around the U.S. He said units in the city's few relatively tall condominium buildings, such as Park Plaza near the Albuquerque Country Club, are in high demand. The former mayor acknowledges the concept is likely to trigger backlash among some in the city but chalks that up to "parochialism."

"Albuquerque is a big city now; it just doesn't want to act like one," said Baca, who was mayor from 1997-2001.

Even new development at a higher price point can make a difference, Clarke said. A family moving into a $500,000 condo may put their $350,000 single-family house on the market. That, in turn, creates an opening for someone who wants to upgrade from their $250,000 home, which may then become available for a first-time homebuyer.

Inactivity is the true threat to affordability, he said.

"When we do nothing," he said, "everything gets expensive."

The city in 2017 adopted the Integrated Development Ordinance, which Clarke said provides opportunities for growth.

The code allows multifamily development in most major corridors, though heights would vary. The more common zone category allows 48 feet, while others would allow up to 65 feet. In the rare cases of especially large lots, development could be exempt from height restrictions.

Detached accessory dwelling units with kitchens, meanwhile, are not automatically allowed citywide, though they are now permitted in a greater number of areas than they used to be.

David Campbell, a former city official now working as CEO of the Mesa del Sol planned community, said the IDO provides more certainty for developers but there are other issues. Projects, he said, are often hung up in the bureaucracy. Campbell, who in the past served as the city's chief administrative officer and later as planning director, said leaders could both change development approval time lines via policy and also prioritize growing planning department staff.

"I say that kindly — three years ago, I was the city planning director and I felt like we were moving very rapidly and getting projects through the process quickly," he said. "Now, three years later, I'm on the private side. Not too much has changed on the city side, but I can't believe how slow things are."

Funding affordable builds

No matter what the private sector builds, McCue said local governments often still step in to fill voids.

"The bottom line is the market isn't going to be able to create housing that's affordable to everybody, so the other thing that local jurisdictions are doing more is actually funding affordable housing construction," he said.

Asked at a recent news conference what the city was doing to protect affordability for existing residents, Mayor Tim Keller said Albuquerque was fortunate because prior price stagnation meant "we're starting from a very good place," but that affordablity is something his administration is monitoring.

"The good news is the city has very good ordinances to protect affordability and so we'll see how those play out," he said. "Obviously, if that becomes a stronger issue, we'll have to have some stronger ordinances."

A spokeswoman said the mayor was referring to Tax Increment Development Districts, or TIDDs, and other economic development incentives and programs that require the recipient to include affordable housing in their projects. The city's Metropolitan Redevelopment Agency, she said, also plays a role and has helped add to both market-rate and affordable housing development.

The city has a "range of strategies" for housing, said Lisa Huval, Albuquerque's deputy director for housing and homelessness.

That includes enough rental vouchers, contributions to affordable housing development and down payment assistance, though she noted that rising prices — and the eventual end on the COVID-19 eviction moratorium — are likely to increase demand.

"We anticipate that we're going to see more and more folks needing assistance to pay for housing," she said.

The city has $11.8 million budgeted for rental vouchers for the fiscal year that starts July 1, up from $9.8 million currently, and enough to aid an estimated 1,000 households.

The city currently is developing high-impact strategies to increase local affordable housing, Huval noted. That's through the Homeless Coordinating Council, a body formed last year to bring together city, Bernalillo County, University of New Mexico and other community partners to address local housing instability concerns.

Benton calls the HCC one of the city's most productive outlets.

But he has also challenged the city's commitment to affordable housing.

Leaders have in the past included up to $10 million for the Workforce Housing Trust Fund — which supports affordable housing development — in the infrastructure package sent to voters every other year. For 2021, the City Council included only $3.3 million in the package, but separately approved from federal COVID-19 relief money an additional $3.4 million for development and $3.3 million for home rehabilitation assistance.

Benton was among the councilors who unsuccessfully pushed for more, encountering resistance both from Keller's administration — which said it would struggle to manage and spend additional funding — and from some within the council itself.

As it stands, a total of 68 new affordable units supported by the trust fund came online this year. The fund will help bring another 152 online in fiscal year 2022, plus help at least four Sawmill area home buyers with down payment assistance.

That remains a relative drop in the bucket.

An outside 2020 analysis found that the city was 15,500 housing units short of meeting the need of those with extremely low incomes.

Benton said the city should be putting more toward affordable housing. The city is getting over $100 million from the American Rescue Plan Act federal COVID-19 package alone, and Benton said the city should be maximizing it with sweeping housing investments rather than what it has done so far, which is to put a piece toward housing but also scattering dollars across many city needs, such as government vehicles, city building improvements and business grants.

"When we have a windfall, it shouldn't be something that we divide up (into) equal pieces of the pie for parts of town as opposed to something that could really help turn us around," he said. "Housing is also about health."

Benton also wants the city to diversify its investments. He said trust fund money is too often tethered to apartment projects reliant on highly competitive low-income federal tax credits. The city's money can — and, Benton contends, should more regularly — go toward buying land for future developments or buildings that could be rehabilitated into housing for low- and middle-income households. The city has done that on occasions; in fact, a 5-acre North Valley parcel it bought six years ago is now slated for a development that will include 60 affordable rental units, plus 23 homes — six of which will be designated as affordable.

Investment needed

Porter said the city should be investing more heavily in housing issues, particularly with the influx of relatively unrestricted federal COVID-19 relief money.

"Everything improves when people get to own their own houses," she said.

And Gonzales, Homewise's senior director for policy and community engagement, said she sees potential for improvement even in existing programs.

While all of the federal housing support dollars that flow through the city's Family and Community Services Department are restricted to those making 80% or less than the area median income — a limit of $43,200 for a two-person household — Gonzales said the need is broader and the city should consider expanding to 120% AMI for its non-federally funded programs.

"We can reach a little bit higher target market," she said. "We think even up to 120%. We think that's so high; it's really not."

And even in the case of federal dollars, she sees opportunities to make more of an impact. Homewise administers $1 million in federally funded down payment assistance for the city. Gonzales said the city used to restrict support to $20,000 but Homewise pushed to raise the cap to $40,000.

Down payments can be a major obstacle for people of color, in particular. Renters who are Black or Hispanic have less net wealth than their white counterparts, according to the Harvard JCHS report.

"Without explicit policies designed to help close home ownership gaps, wealth disparities between households of color and white households, as well as between renters and homeowners, will remain large," researchers wrote in the report.