Alabama and its population of more than 5 million has been facing an affordable housing crisis for the past 15 years. However, things are beginning to normalize after a long time with 6 million sales recorded by the state in 2021. The demand-and-supply gap continues to exist but with global supply chains returning to normalcy and other market dynamics becoming favourable, things are beginning to portray a brighter side.
With a group of 20 leading economists who analysed the current market, a number of conclusions have been drawn. Although housing prices are expected to increase 5.7% in 2022, the pandemic backlog is expected to reduce substantially. Housing sales are predicted to drop a little going to 5.9 million but at the same time, starts are expected to rise, hitting 1.67 million. These states will ease the pressure on the affordable housing market.
Here are some of the challenges that the state is facing at present;
Existing Resources Aren’t Enough
Alabama continues to struggle with a lack of financial resources to address the city’s affordable workforce housing issues. The state’s federal entitlement has decreased dramatically over the years. As a result, home production investment has decreased. As a result of the decreasing availability, people are having difficulty finding new projects that fit within their budget. As a result, the condition has become more serious.
Decreasing “Affordability” of Housing Projects
With all of the issues that have arisen in the housing market in recent years, the most significant impact has been on pricing. There aren’t enough “cheap” units to meet demand, which is rapidly increasing. Although there is little that can be done to streamline the supply chain for items due to global trade dynamics, alternative methods can be explored to ensure that prices are reduced to some level.
This can be accomplished through collaborative efforts. Some supply chain problems can be avoided by government subsidies and tight collaboration with local and multinational suppliers. As a result, prices may decrease. On the other hand, financial institutions’ reasonable financing choices are another strategy to keep the market stable on both sides.
Multi-level cooperation can make a significant difference in many of the difficulties confronting the affordable housing sector. Financial institutions, manufacturers, suppliers, contractors, and other stakeholders are all possible partners. With everyone having a stake in the game, Maxwell Drever of drever capital management believes that finding solutions will be easier. Each party can work together to find a solution to some of the supply chain’s constraints.
Alabama’s affordable housing sector is under a lot of strain as a result of global supply chain disruptions. This makes matching demand and supply for these units a significant task. Although some of the difficulties will take time to fix, prompt corrective action and alternative arrangements are needed now to prevent the market from collapsing. The current administration and its plans like the Build Back Better initiative will bring a positive change in the industry.
The Difficulties Faced by Households to Afford a House
While housing is an essential human requirement, acquiring a budget-friendly home is challenging for many Americans. A home is affordable if it consumes less than one-third of the household’s total income. Millions of renter households in the US are burdened with high expenditures, spending more than 50% to pay the exorbitant prices for a living. The shortage of sufficient affordable units has negatively impacted the communities. The cost of housing has burdened many families leading to severe stress and health problems, affecting their overall stability in society. Insufficient houses near workplaces have also impacted traffic and other environmental hazards.
Here are a few challenges faced by families due to a lack of affordable housing:
The lack of cost-effective homes has minimized diversity in the community and negatively impacted other essentials such as food security, transportation, and medical expenses.
The challenges in the supply chain
Affordable housing has brought about significant challenges in the supply chain. There has been a considerable shortfall in the number of affordable units leading people with low money income to become homeless. With the current production speed, a vast majority of individuals cannot access affordable homes for their families. There has to be a substantial increase in the base of construction, or the supply will never be able to meet the increasing demand.
Insufficient income and excessive regulation of land
Another significant challenge faced by people trying to access an affordable living in the low monthly income due to sufficient job opportunities. Various countries and states’ governments must provide financial assistance to families with insufficient monthly payments. However, sometimes there is an incidental shortage of affordable housing due to excessive regulations on land. Such factors contribute to the unaffordability and scarcity of rental units. Maxwell Drever of drever capital management says that, under such circumstances, the increase in supply will not be able to solve the problem of affordable housing unless there is adequate financial support for people with low money income.
Emphasizing on the demand
In addition to the above factors, it is also essential to divert the focus on demand for affordable housing. Many individuals cannot afford a roof at market prices, increasing the demand for affordable homes. Many low-income rental households get burdened with the high cost of living. One of the reasons encompasses the redistribution of wealth among people that increases the income of individuals and shrinks the middle class all the more. The upper-income households getting richer has impacted the lower-income families significantly, leading to the inability to afford a house at market rents.
Addressing the problem of affordable housing scarcity
Irrespective of the number of issues the household faces that make houses unaffordable, there are plenty of opportunities to address the problem of budget-friendly housing. House developers can establish more property and increase the supply of affordable homes. In addition to the above, it is also essential to provide financial aid to low-income households and the construction facility to minimize the cost of building the units.
In the persistent challenge regarding affordable housing units, the government can address the issue through various federal policies and minimize the gap in income by providing the poor individuals with financial support by making houses affordable to such individuals.