Thousands of units scheduled to transition to market rate
Nevada is already experiencing an affordable housing shortage, but state Sen. Julia Ratti warned lawmakers Monday another 7,500 affordable units could be lost in the next five years if nothing is done.
The state’s fraught relationship with housing security and the lack of available units, only underscored by the pandemic, was highlighted Monday while discussing two proposals, one an effort to preserve existing affordable units and the other a proposal to require zoning for tiny homes.
Affordable housing can be created by non-profit contractors and privately owned developers that secure tax credits in exchange for allocating a portion of its units at affordable rates. In either case, a contract designates how long units are deemed affordable, whether it’s 15 or 30 years.
Senate Bill 12, introduced by Ratti, seeks to provide localities and tenants a 12-month notification before units are no longer deemed affordable. The legislation would give municipalities a chance to work with developers to keep properties from transitioning to market rate and, if need be, relocate low-income tenants.
The state has built 7,177 new affordable housing units and renovated another 5,245 units since 2011, but it has lost 5,821 in the same amount of time.
In 2020 alone while 1,546 units were either built or renovated, contracts on 108 units expired.
“Losing the existing inventory is weighing us down,” Ratti said. “We can build all the new units in the world, but if we can’t keep the ones we’ve already got we’re not making any progress.”
The legislation wouldn’t prevent owners from transitioning to market rate when the contract ends.
But Ratti said there needs to be at least a year to “work on it and try to save those properties.”
“There is nothing we can force the owner to do, but in many cases if we know about it we have the opportunity to offer additional tools to keep it affordable or in some cases we can organize a sale to an affordable developer who wants to keep those units affordable,” she said.
Several other states including California, Illinois, Massachusetts and Michigan have implemented an early notification process.
“The cost to preserve a unit, to keep a unit affordable, is usually about 30% to 50% less than the cost to develop a new property altogether,” Ratti said. “We’ve already invested taxpayer dollars into these subsidized affordable housing units, usually millions of dollars. If we can extend the life of that property, then we can protect that initial investment.”
A variety of obstacles including land-use restrictions, push back from communities citing Not In My Backyard (NIMBYism) and the cost of land has hindered building more affordable housing.
Nevada has an estimated 44% of people who rent, and with the lack of existing stock they are forced to compete for the few available options.
While the U.S. Department of Housing and Urban Development estimates Nevada fair market rent is about $1,065, Ratti said those figures “lag and the data is a couple years old.”
She said recent numbers indicated it costs, on average, $1,211 to rent a two bedroom apartment in the Las Vegas area and $1,436 in the Reno-Sparks area.
“In order to be able to afford that apartment in Vegas, you would need to be making $22.51 per hour and in Reno you’d need to be making $30 per hour to be able to afford that,” Ratti said. “The average renter’s wage is $17.42. What that means is in Nevada we have an extraordinary number of people who are cost burdened.”
Nevada’s minimum wage increased to $8 in July for workers whose employers offer a health care benefit and $9 for those who don’t.
Lawmakers passed legislation in 2019 to gradually increase the wage to $12 by 2024 despite a push by organizers for a $15 figure. There is no legislation to further increase the minimum wage or accelerate the schedule for increases.
In the absence of building more affordable housing — lawmakers are expected to debate other measures around affordable housing, but budget constraints could tie their hands — Ratti said preserving units is another option.
“We’ve done a lot of work talking about affordable housing and the need to build more units, but I think the place we may have missed the mark a little bit is on preserving the affordable housing we already have,” Ratti said. “The most cost effective method that the public sector can make is ensuring that it’s citizens have decent and affordable places to live.”
The bill gives the Nevada Housing Division the ability to fine developers up to $10,000 for failing to notify municipalities and tenants when affordable units are a year away from returning to market rate. The prospective penalty wouldn’t apply to nonprofit developers, who in most cases signed a 30 year contract and have fulfilled their obligations.
State Sen. Dina Neal asked if other states have implemented penalties and faced subsequent lawsuits. She worried inserting a new term on existing contracts could open up opportunities to face litigation.
Ratti said the Legislative Counsel Bureau was consulted to determine if legal issues could arise and was told the current language was “staying within a safe space.”
Also heard Monday was Senate Bill 150 sponsored by state Sen. Dallas Harris that requires localities to find a place to put tiny homes, which are 400-square-feet houses. People can buy ready-to-build tiny homes from retailers including Amazon and Ikea.
Counties with populations of more than 100,000 would have to “designate a zone for tiny houses as an accessory dwelling unit, a single-family dwelling unit and to allow for tiny home parks.”
Counties with less than 100,000 would have to choose one of the three designations.
“The bill does not require any tiny homes to be built,” Harris said. “It does not require municipalities to overlap existing zoning with tiny home zoning if they don’t choose.”
Neal raised concerns about disparities created by zoning, and envisioned a scenario where local governments would opt out of establishing tiny home zones in mostly white areas like Summerlin in favor of predominantly Black neighborhoods like the Historic West Side, a move she worried could hinder redevelopment and exacerbate already existing racial inequity.
“I’m not a fan of tiny houses mainly because I don’t want it to go into poor areas, and I don’t want it to go into poor areas that I want redevelopment to occur and have sustainable homes,” she said.
Harris said the bill doesn’t address zoning-induced disparities. She also pushed back on the idea that tiny homes hinder redevelopment and are a drain on communities.
“This is something I would personally choose to live in and maybe build as a permanent residence,” she said. “I also see these as a stepping stone to larger home ownership in that American dream sense and not as some hindrance to that eventual dream.”
The City of North Las Vegas was the only municipality to support the bill while most other governments testified as “neutral,” wondering if the legislation “would be a good fit” for every county.