Despite a society-altering pandemic, home prices in Nevada have reached record highs in recent months.
In January, the median cost of a house in Reno hit $500,000, while in Las Vegas, that number reached $345,000. Both figures have surpassed pre-2008 peaks.
At the same time, Nevada’s affordable housing scarcity has gotten worse.
The state has a shortage of roughly 79,620 affordable units available to extremely low-income renters — people earning 30 percent or less of area median income — according to the Southern Nevada Home Builders Association.
“The pandemic, from an affordable housing perspective, has really just revealed the crisis and put so many more at risk of homelessness,” said Christine Hess, the executive director of the Nevada Housing Coalition.
Advocates, real estate agents and developers have turned their eyes to Carson City, with representatives for each group saying that lawmakers’ decisions this session will have long-term implications for the future of Nevada’s housing market.
Proposals on the table this legislative session include a measure preventing landlords from denying applicants because they rely on public assistance, a proposal to extend the timeline of a $10 million tax credit program approved in 2019 for developing affordable housing and a bill allowing developers to create more tiny homes.
Developers are struggling to meet the demand and worry that affordable housing projects can be cost-prohibitive, Southern Nevada Home Builders Association CEO Nat Hodgson said.
“I’ve been where I can’t build enough. I’ve been where we’ve had too many builds. Right now we cannot keep the supply going for the demand,” Hodgson said. “Here’s the sad part … I’m looking at my 21 and 23-year old sons and I’m going, ‘you know what? I don’t know how you guys are going to be able to afford a new home.’”
Campaign donations made ahead of the session underscore how important housing issues are expected to be in the Legislature. Real estate companies, developers and PACs funded by those companies contributed more than $1.3 million to lawmaker campaigns — the most money any single industry donated to state legislators.
Below are some of the significant themes, bills and discussions surrounding housing this legislative session.
Nevada’s housing market
Twenty-four days — that’s the average length of time in February that a house in the Reno-Sparks area sat on the market before a seller moved forward with an offer.
Quick turnarounds on home sales may sound good for the economy, but experts say it’s a problem when there is not enough housing to meet demand.
Healthy, balanced housing markets typically have about six to seven months of supply, meaning that homes will sell out if developers do not produce new housing by the end of that time frame.
State economists’ predictions place Southern Nevada’s housing supply at about 1.5 months. In Northern Nevada, that number is closer to one month, setting up buyers and renters for higher prices and more difficulty in securing housing.
And the market shows no signs of slowing down, said Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada (EDAWN).
“Most elected officials and most leaders, even in the business community have no clue how bad the housing crisis really is, and the reason they have no clue is because they’re in their house and they’re not being exposed to it,” Kazmierski said. “Just go out and try and buy a house. It’s nearly impossible.”
While the pandemic led to fewer housing sales during the second quarter of the most recent fiscal year, it did not appear to affect Nevada’s rising home prices. But widespread unemployment could eventually ripple into the housing market — state economists say that homeowners’ inability to pay mortgages and continued price increases might lead to foreclosures that could slightly lower home prices in the future.
So what’s driving the boom in housing purchases and a rise in scarcity? The drivers include historically low interest and mortgage rates offered by the Federal Reserve in the wake of COVID-19; new residents attracted to a state with no state income taxes, lower living costs and less traffic congestion; and increased remote work opportunities that have spurred relocations to the region, bringing in people used to paying higher housing prices (some of whom can afford to pay cash) from California, Washington, Utah, and Arizona, among others.
Kazmierski said the emergence of new tech-based industries in Northern Nevada has allowed the region to weather the pandemic more successfully than tourism-dependent Las Vegas.
However, he also said the changed economy has intensified income disparity in the region, with wealthier households able to afford higher prices for homes and inadvertently contributing to higher overall housing costs and a greater shortage.
“The people at the end of the day that will suffer the most are the ones that can least tolerate that,” Kazmierski said. “People that have a higher wage are going to be able to find a place to live and the people who are lower income, elderly, disadvantaged, part of our community is going to truly suffer if we don’t do something.”
Scarce affordable housing
Nevada is among the eight states with the least available affordable housing for lowest-income renters. Affordable housing is generally defined as housing that costs no more than 30 percent of a person’s gross income.
Research from the National Low Income Housing Coalition shows that Nevada has roughly 18 affordable units for every 100 people who earn 30 percent or less of area median income.
That’s worse than at the national-level, where there are 36 affordable and available units for every 100 renters making 30 percent or less of area median income.
Renters working in lower-income occupations are also more likely to be affected by the pandemic than higher-income homeowners, said Brian Bonnenfant, project manager for UNR’s Center for Regional Studies.
Another metric for assessing affordability is fair market rent, a reasonable rent price for low-income families as determined by the federal government.
According to the National Low Income Housing Coalition, fair market rent for a two-bedroom apartment in Nevada is $1,065 a month. But to afford that rent while paying 30 percent of income, a household would need to earn monthly wages of $3,549, or $20.48 per hour. That’s $11.48 more than the state’s minimum wage.
The state’s median household income is $60,365, or roughly $5,030 a month, according to data from the U.S. Census Bureau. If 30 percent of that median household income goes toward rent or housing, that would be $18,109 per year or $1,509 each month.
Roughly 12.5 percent of Nevada’s population have incomes below poverty level, which the Department of Health and Human Services defines as $12,880 for a one-person household, 30 percent of which is $322 per month, and $26,500 for a four-person household, with $662 going toward rent each month.