Chipping Away at the Towering Issue of Housing Affordability
CUs may only be making a small dent in the issue of housing affordability, but their efforts are well worth it.
For many Americans, the housing system that’s currently in place, which should be designed to provide viable housing options for people of all income levels, flat out isn’t working.
During a recent interview, Larry Ellifritz, president/CEO of the $244 million Consolidated Community Credit Union in Portland, Ore., shared an anecdote that many parents with kids entering the workforce might relate to. He said his college-age son recently told him that after graduating and getting a job, he wouldn’t be able to afford living in Portland. “That was when it first hit home for me, that [affordable housing] is a problem,” Ellifritz said. The average monthly rent for an apartment in Portland (at an average size of 762 square feet) is $1,457, according to RentCafe.com.
Ellifritz added that some of his credit union’s tellers have mentioned having trouble finding an affordable place to live, further proving that wages are not keeping up with housing price increases. I would imagine that credit union employees in other growing cities are struggling to pay rent too, despite having full-time positions.
How did rent in a once-affordable city like Portland (note: I recall the rent in my two-bedroom, one-bath apartment being $650 in Portland proper in 2006) become so out of control? According to several articles that analyzed the issue, it’s due to an influx of renters in Portland along with a lack of wage increases and a lag in affordable housing construction. An August 2018 Washington Post article explained that after a major slowdown in new housing construction during the Great Recession, Portland struggled to accommodate approximately 40,000 new residents who moved into the city between 2010 and 2018, with 95% of private housing construction in the city falling into the “luxury” category during that time period. As a result, average rents for poorer residents of Portland have risen by over 40% since 2010, the Post article said.
The problem is glaring, and solutions must come from a variety of entities, not just the lawmakers for cities that are facing a housing crisis. That brings me back to the Ellifritz interview – after sharing a little about how the problem has hit home personally, he explained how Consolidated Community and other Northwest credit unions are doing their part to increase access to affordable housing, despite the overwhelming nature of the issue.
The Northwest Credit Union Foundation recently awarded $290,000 in grants to three Northwest credit unions including Consolidated Community, which are being used to fund projects that help expand the availability of “workforce housing” – affordable housing for working people who are overqualified for low-income housing but still struggle to cover housing costs – in their respective communities. One of these projects is Consolidated Community’s new ADU (accessory dwelling unit) loan program, which funds the construction of new units on existing residential properties in the Northeast Portland community that property owners can rent out to tenants in need of workforce housing. Since April 2019, Consolidated Community has made six ADU loans and has another four or five in the works, Ellifritz said.
Another Consolidated Community project, a security deposit loan pilot, aims to assist people who can afford a monthly rent payment but lack cash to cover move-in costs. It offers borrowers a 12-month, 4.99% fixed rate loan of up to $5,000 to cover a prospective tenant’s first month’s rent, last month’s rent and deposit.
Since its rollout, the loan has already transformed several lives, including a single dad and his two boys who were sharing a studio apartment. Ellifritz recounted that the father wanted to move into a one-bedroom apartment (he planned to sleep on the couch, while the boys would have bunkbeds in the bedroom), but was short $1,200. When the security deposit loan allowed him to make the upgrade, he was so happy his boys would finally have their own room. “He had tears in his eyes,” Ellifritz said, adding that the pilot project also made the credit union aware of an untapped market. “We typically lend money to people who buy things, so you don’t realize there’s a whole segment of the population that you don’t see on a day-to-day basis.”
Other efforts being made by Consolidated Community to address the lack of affordable housing – the details of which won’t fit into this particular column – include community partnerships to support ITIN lending for immigrants, a first-time home buyer savings account and a community home loan, which allows low-income buyers and buyers in reinvestment areas to purchase a home without a down payment.
What’s next in the push to create more affordable housing in Portland? On the policymaking side, Oregon lawmakers recently passed a statewide rent control law that caps annual rent increases to 7% plus inflation, in an effort to bring some relief to renters. But there is no permanent, long-term fix in sight, according to Ellifritz, who explained that while a recent uptick in new housing construction will bring rents down, they’re likely to go back up again, as falling rents would lead to a halt in new construction. And if people continue to move to the city at the rate they have been, they’ll continue to outnumber housing vacancies, he added. “It will feel better, but it’ll be a false sense [of things getting better],” he said. “It will become a bigger and bigger issue. If you look at San Francisco and Seattle, Portland is trending along those lines.”
If solving the issue of affordable housing equaled building an entire mansion, you could say credit unions are laying down a few rows of bricks. But because their efforts are making an incredible impact on some individuals’ and families’ lives, they’re hardly a waste of time.
The projects underway at Consolidated Community and other Northwest credit unions are also a great example of how much more credit unions can accomplish when they work together instead of in competition with one other. Ellifritz noted the security deposit loan program has caught the attention of other cooperatives, and he’s more than willing to share the details. “I’ve had 10 credit unions reach out to me asking for the guidelines,” he said. “I’m willing to give them to as many people as I can, and I encourage credit unions of all sizes to try it.”
Natasha Chilingerian is managing editor at CU Times. She can be reached at nchilingerian@cutimes.com.