Dominium’s Role in Helping Solve the U.S. Housing Shortage

The United States is suffering from a severe housing shortage. How severe? According to Freddie Mac, from 2018 to 2020, the housing stock deficit in the U.S. rose by 52%. Habitat for Humanity estimates a current deficit of nearly 4 million homes.

That lack of supply is driving up prices at record rates. A recent article by NPR notes that home prices are up 20% this year alone. And the median sales price of existing U.S. homes reached a record high of $416,000 this year, according to Forbes. This housing crunch hits lower-income Americans the hardest, especially those looking for rental homes. For every 36 affordable and available rental homes, there are 100 households seeking to fill them, according to the National Low Income Housing Coalition. 

At Dominium, we believe the best solution to America’s housing crisis is to build more housing of all types across the entire continuum. Increasing supply will help moderate demand, and ultimately begin to stabilize pricing.

So, what is the best way to make that happen? While there are myriad efforts taking place across the country, Dominium believes that two federal affordable housing programs – coupled with investments and commitments from private developers, builders, owners and managers – offer the greatest potential to address housing affordability.

Two Programs, One Goal

Section 8 and Section 42 are two of the federal government’s primary affordable housing programs. While they both have the same goal, to create and preserve affordable housing for eligible Americans, they function differently. 

Section 8 is a Department of Housing and Urban Development (HUD) housing program in which residents pay 30% of their monthly adjusted income as rent. HUD through the local public housing authority pays the difference of what the unit rents for on the open market and what the renters can afford to pay, by providing Housing Choice Vouchers (HCVs).

Section 42 is another name for the Low Income Housing Tax Credit (LIHTC) program, which is where Dominium concentrates most of its efforts. More specifically, Dominium focuses primarily on LIHTC properties in which residents qualify for below-market rates if they make 60% or less than the Area Median Income (AMI). HUD then sets the amount of rent each property can charge based on that year’s AMI.  

Section 42/LIHTC has received strong bipartisan support since its inception in 1986 – and for good reason. The program’s primary benefits are twofold: it keeps rents at below-market rates for those seeking affordable housing, while also providing enough cash flow for owners to maintain the properties and keep them in good repair. The LIHTC program allows companies like Dominium to offer high-quality housing to low- and moderate-income Americans for extended periods of time. 

As successful as the LIHTC program has been, the reality is that the need for affordable housing continues to outpace the country’s ability to provide it. At Dominium, we know from experience that the best way to increase affordability is to increase availability

However, the current LIHTC program does not provide enough funding to meet demand. In addition, because LIHTC rents are based on a community’s income levels and not the incomes of individual renters, these apartment homes often remain unaffordable for those whose incomes fall below the 60% AMI threshold.

The Section 8/HCV program on the other hand, is designated for these lower-income renters – households who earn 50% or less of their local AMI. In addition to bridging the gap between the cost of housing and what these renters can afford, vouchers also offer flexibility. They can be tied to a specific property, or they can be brought to a property by an individual renter who was awarded the voucher by a government body. (Most Dominium properties accept HCVs.)

When viewed together, we believe there are two clear actions the U.S. should take to address the affordable housing crisis:

  1. Expand the LIHTC program. This would increase the number of housing units created annually, helping bring supply closer to demand.
  2. Provide more Housing Choice Vouchers. More vouchers would allow the lowest-income renters access to more of the available housing units.

Dominium Pushes for Change

Dominium has and will continue to advocate with key stakeholders for more affordable housing. This includes lobbying city, local and state governments and housing agencies, as well as communicating with key congressional leaders and federal agency leaders. The goal: identifying pivotal ordinances, policies or pieces of legislation that can be changed or created to make affordable housing more accessible to more people.

While the affordable housing crisis is more than one organization can solve, Dominium remains committed to being part of the solution.