The Housing Needs of Ohio

Ohio Chamber Director Of Tax and Economic Policy Tony Long was joined by Senator Bill Blessing and Representative Dani Isaacsohn to discuss the scarcity of housing and what can be done at the state level to provide solutions that lead to more affordable housing.

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Transcript

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Welcome to the latest episode of Down to Business, the Ohio Chamber Podcast. Today we're going to focus on housing and have a discussion around the housing needs of Ohio. I'm Tony Long, general counsel and director of taxation and Economic policy for the Chamber of Commerce. Before I introduce my guest today, I want to start with some housing numbers in Ohio to kind of set the stage for this conversation. Central Ohio's expected to grow to 3.25 million people by 2050. Housing starts in central Ohio need to start around 14 to 15000 units per year to keep up with this growth. Right now, we're doing seven, sometimes 9000 per year. Ohio also needs nearly 250,000 units for extremely low income renters that make up this 24% disabled, 23% seniors, and 35% able bodied workforce. So we have a lot of issues here in Ohio to meet this housing need of our citizens. So join me today for a conversation on our housing needs. I want to welcome Senator Bill Blessing, Representative Danny Isaacson to the podcast to discuss the housing needs of Ohio. I'll let you gentlemen introduce yourself to the audience. Yeah, thank you for having me, Tony. State Senator Bill Blessing. I represent the eighth Senate District, which is Western Hamilton County, as well as the northern suburbs. And I'm very happy to be here because I firmly of the belief that housing is our number one issue that we have to fix in Ohio. And it is certainly an urgent need. And this is State Representative Danny Isaacson for us here from Cincinnati, from a neighboring part of town. I represent downtown Cincinnati, and then over to the west side of town, all the way along the river to the easternmost parts of the city. And just really grateful to be here. I share Senator Blessing's belief that housing is an issue that we have to do. We have to do better on if we're going to actually make meaningful improvements in the lives of the people we serve. So excited to be here. Thank you both. So I think back in April, we started this conversation and we talked about the idea of how to increase housing stock in Ohio. And we'll get into specific issues surrounding Senate Bill 76 that kind of started the conversation. But I want to zoom out a bit to the larger issue of scarcity housing stock. Have you both been focused on this issue as a priority and how did it originally come to your attention? Thank you for that, Tony. Yes, I've been focused on this as one of my my big priorities in the Senate. You know, it's not just Senate Bill 76. I also have Senate Bill 36 out there as well. It came to my attention actually somewhat recently after the pandemic. I started getting a lot of emails and calls from constituents about large institutional housing, investors buying up properties, as, you know, jacking up rents significantly. And I started researching the issue online and going down the rabbit hole as one typically does when they get online and found that there is you know, this has been actually not just a recent phenomenon that I originally thought started with the pandemic, but, you know, goes back years and decades and includes a large under build and sense looking around and this is before I had connected with state Rep Isaacson. I didn't really see a lot of my colleagues working on the housing issue at the state level. So I wanted to make it my own and and, you know, dive into it and see how I could be helpful. And, you know, I came to this before starting in the Ohio house in my my first term. So only been at it six months now. I ran a community engagement business that really focused on lifting up the voices of people living the issues every day. And I spent dozens of evenings over those five or six years sitting in rooms, talking to people and listening to them explain how housing was the central obstacle in their life. And I remember one woman talked about going from empty warehouse to empty warehouse to friend's couch to her car with her three kids who I who I know and you sort of might assume that. Well, she's she's probably in between jobs. She's, you know, struggling to find work. Well, no, she actually had a full time job as a manager, one of the central Cincinnati McDonald's, but could not afford housing for her and her kids. And it it was an example for me of the way that housing and housing issues reflect all the ways in which society isn't always working for people. Our jobs aren't paying enough. There's not enough housing. The scarcity creates higher prices. There's also probably not enough regulation on landlords. There's exploitative practices going on. You often see higher rents and some of the worst quality housing neighborhoods. How does that happen? You would think price would be related to quality, or it's because of the relative power people have, and those are all policy choices ultimately. So I was so excited to connect with Senator Blessing when I got here and really start thinking through how can we make a dent on some of these issues. Yeah, to that point, I mean, that's why I kind of mentioned the statistics on the need for extremely low income renters. There's a maybe a stigma around what those stats are, but you know, it's 23% of our seniors need that kind of housing. 24% of that housing is for disabled. And then, you know, to your point, a representative, 35% of that make up is able bodied workforce that just can't find the housing that they can afford. Which leads me into a recent Zillow report that I found amazing that Cincinnati now has the highest rent. Its rent is rising faster than anywhere else in the country. And you think of places like Boston and San Francisco and here in Ohio, it's Cincinnati kind of leading the pack. So many of the issues facing the scarcity of housing that helps rise the rents and home prices and makes housing less affordable for many Ohioans, It really comes down to some local issues and solutions. So here in Columbus, what can we do at the state level to either help our locals or provide solutions that could lead to more housing? Well, you know, this is the second year in a row Cincinnati has had a summer where it was the fastest growing rent. So this is this is not a new trend. And so it compounds on itself. And housing has continued to just be so out of reach for so many people. There are a huge number of families in Ohio paying more than half of their income on rent. And if you also have a kid under the age of five, almost 100% of your income is going to rent or child care, which doesn't leave much for housing or for food or transportation or any other items that you need. And so, you know, here in the state house and as policymakers, there's a few things we can do. One, we can focus on the supply side so we can encourage denser housing being built. We can look at incentivizing more inclusionary zoning. One of the things that cities have done for the last 100 years, but especially since the end of legal housing segregation, has been to use exclusionary zoning, single family zoning to maintain some elements of either class or race based housing segregation. And we see it, which shows up in our cities today. So what we what we want is denser housing. We want diverse housing. We have great data that if you come from a low income background, you're going to grow up to make more money and be healthier. If you are raised in a diverse neighborhood by income. Right? If you go to a diverse school by income rather than a segregated school. So we know there's benefits to increasing the supply. But there's also a question of how do you help on the demand side? How do you help people pay for it? And and this is where, you know, I'll kick it over to Senator Blessing because he's been so thoughtful on this. But, you know, when the federal government gave all this money to help people pay for rent during the pandemic, it helped for the first year. And then basically most landlords baked it into their their cost and they increased rents. And so we're seeing that in Cincinnati at the most extreme. So just giving people money to pay for rent isn't going to solve the problem unless you're also dealing with what is fundamentally in exploitative system in so many ways that captures the rent from the people actually paying it, and so they don't see the benefit. So as policymakers, we need to be focused on the supply side and making sure that we're getting more housing out there, but also dealing with what are unfair market practices. And the senator has been leading on that. Well, I just want to say, you know, amen to many of the points that you've just raised. Representative Isaacson, and I'll start with with your comments on on the rent and childcare issue and how much money is spent by your your average family on on those two things. And I would just, you know, tell the business community, since we're, you know, on an Ohio Chamber podcast that it's you know, there's all this talk about, you know, difficulty finding workers. And a lot of times the discussion is around workers below the, you know, 20, $25 an hour wage. And, you know, if you have rent and childcare costs skyrocketing, you're going to have a very difficult time filling a lot of these jobs when people can't live and work in the same area. So I would I would contend that the business community has a very vested interest in solving not just the rent problem, but also the child care issue. That said, I you know, I agree, you know, attacking this from a supply side approach. You know, some of the some of the pitches that I have made have just simply been, you know, let's just build more, not just, you know, properties for low income renters, but all of the above market rate rental as well as, you know, opportunities for homeownership, which I think is something that sort of gets lost in translation here, that we should be encouraging homeownership from the standpoint that it allows the people who do own homes to build intergenerational wealth, they'll have something to pass on to their their children. And that's not always the case with folks that are renting. I read a statistic months ago about how homeowners have 44 times the net worth of renters. And I just feel if this if this is going to be or if we're going to try to promote a prosperous Ohio and America, we're going to have to encourage homeownership to some degree, which gets into the the issue with the institutional investors playing a role with this. And in my district and also in Rep Isaacson's district, some of the big large private equity groups, even even pension funds, are bankrolling some of these entities to buy up a lot of the single family homes that not all but a good chunk of them were owner occupied and turning them into permanent rentals. So they're not actually adding to the housing stock. What's happening is they're pulling homes out of the ownership column, which is decreasing the supply in that column and adding them to the rental column. So if you're wondering why in many respects the the cost of purchasing a home has gone up while when that starter home is taken off the market because it has been purchased up by a large private equity outfit, people who want to own have jump to the next rung rung up and housing prices are just bid up higher and higher at the same time. On the on the rent side, the model is to try to get as much rent out of these properties as you can. And so the rents have been rising at the same time and I think they've contributed greatly in great detrimental fashion to the rise in, you know, rents and asset prices. But but this is, you know, also just one piece of it. You mentioned local issues and solutions. I would agree with my my colleague that zoning issues are part of it as well. I mean, you get into a lot of things, not just that you get into NIMBYism, you get into lack of building. So it's going to take a multi-pronged approach to solve this problem. And for the audience, when we talk about affordable housing, whether it's a rental unit or a home of the quick back of the napkin, it's 30% of your income. And many Ohioans are well above that. And then you add in the childcare and then you get into the situations that we discussed earlier. I'm going to talk a little bit about Senate Bill 76 since we raised that. You know, it's an issue that I thought maybe was when I saw the testimony was a Cincinnati based issue. But as I talked to more and more people around the statehouse, it turns out this is quite a thing facing many of the cities in Ohio, whether it's a private equity firm or a series of LLC is that are then sold to individual investors who then buy that LLC and technically then own the house and then receive the rents as part of their investment. So I'm not sure Senate Bill 76 is going to move much this session, but are there any alternatives to address the issue of fear of homes being available for ownership? You know, is there something in the private sector that can be done with homeowners associations or is this some other ideas that we can think about around some state solutions or local solutions? To your point, Senator, where we can get this housing first run of housing for starter homes back on the market for homeownership. Yeah. Thank you for that, Tony. I don't want to give up on Senate Bill 76 yet. I mean, I do recognize in its current form that it likely won't pass. However, you know, in talking to my colleagues who have issues with that, that bill, they're not opposed to the transparency piece in the legislation. They do feel, however, that we should be giving the locals tools to deal with these sorts of issues. So what I what I mean by that or what I think they mean by that is not necessarily, you know, going after the investors themselves, but giving the, you know, cities, for example, tools to enforce them, to fix the building code violations, pay their fines and so forth and so forth, as well as being more transparent about who is own, who owns what and how much of of the housing stock is owned by, you know, a particular entity, even if it's operating through a number of LLC. So I think in the long run, what I would like to do with Senate Bill 76 on the on the at least the transparency side, if I could get this, I would consider it a win is model something along the lines of what was done in Congress with the Corporate Transparency Act. I do recognize that that was more of an anti-fraud anti terrorism piece to see, you know, who who the ultimate owners of these shell companies were at that level. But New York also had the LLC Transparency Act that they recently passed. I don't know what the actual vote on that was, but it did get through pretty quickly. And I think that's something we should look at here in Ohio as far as encouraging home ownership. I have some thoughts. I know that some folks want to, you know, try to approach this from the standpoint of what's in the budget with the welcome home Ohio program. But that's a pretty expensive way to go about it. And I told him as much when we were discussing it because constructing new homes is very expensive while trying to shift some of these homes from the, you know, currently rental column, even though that they were homeowners opportunity or homeowner oriented properties, shifting them back out of the rental column, I think would be the lowest cost way to do this. And if if the approach is to be more free market oriented and having talked to some of my colleagues, I think they agree with this to some extent is shifting some of the incentives that bring a lot of these institutional investors to the forefront of this issue. So one example that I brought up was potentially getting rid of the non-business credit for these rental properties. So they'll get the 10% rollback. Now on 1 to 3 unit single family homes that they're renting out. However, the commercial space does not get that. So if you own an apartment, you're not getting that rollback. So potentially taking things like that away and pushing that into, you know, construction of single family housing and requiring those tax credits to be tied to some form of ownership option would be one way to do that. But generally speaking, shifting the incentives around I think would be a good way to encourage more homeownership. Perfect. And you mentioned the budget. We're getting down to the last days of the budget. So, Representative Isaacson, you and I held a conversation before a committee hearing on the idea of getting interested parties together and find common goals to approach the need for more housing in Ohio. And since that conversation, have you maybe given some more thought to this issue? And do we kind of have time yet in this legislative session that ends in December of 2024 to work on some of of these ideas of getting like an IP group together and start to build on these ideas? I absolutely think we do. And I have started to have a lot of those really productive conversations with multifamily housing developers, single home builders, you know, the folks who represent realtors. But I want to just show you how this plays out in someone's day to day life, especially with what the senator was talking about with these LLC that own all of these properties. You have an issue in your rental. It wasn't that good to begin with. You're overpaying. You can't get water. The water's not stops working. It's 95 degrees outside. You've got two young kids and you call the management company. They don't answer the phones off the hook or they give you the runaround and you have no idea. You cannot find who is your actual landlord. You cannot get anyone to pick up the phone when you have no running water. This is a real story from Cincinnati that happened last year. So we can talk about in the abstract, but in the in practical terms, in people's day to day lives, when we allow institutional investors, which is a new phenomenon in housing, when we allow private equity from either other parts of the country or often other parts of the world, to use LLC is so that no one knows who's who is. Their landlords deal with these critical issues. We create an environment like the one we have now where not only is rent unaffordable or is there so few choice for people in terms of housing, but the quality of what you're living in is not good. So I think a lot of people are recognizing that. So on the optimistic side, to your question, you know, I think there are we're in a situation where the whole country is dealing with this. Ohio is not unique. Cincinnati, to your point, is unique, uniquely at the top of the list in terms of rising rents. But Kansas City is right up there with us. You know, there are other cities all over the country dealing with this. And so it's a question of who's going to be the first to get creative and to do an all hands on deck approach. That means working with single home builders to make concrete more affordable and deal with a monopoly in that market. It means, you know, dealing with these exploitative practices and with these institutional investors and getting private equity and its unhealthy stake in the market, probably out of the market and promoting more small, small mom and pop landlords that take care of their property and use it as a way to pay for their kid's college. Right. Gets creative with looking at what the federal government does with 502 loan to guarantee home loans for in rural areas that have been incredibly effective at getting people into homeownership. What can the city and state do to use similar types of loan guarantees to get people in more urban areas into homeownership? Right. There's all sorts of creative things we can do. And I think we are at such a crisis point that people are starting to come together to, you know, let's figure out where where the center of the Venn diagram is for what we're willing to do. Right. So those are good points in here at the Ohio Chamber, we have a housing task force. You both of attended that. I think we continue to look for ways to partner with you both and others at the General Assembly to work on these issues. And maybe Senate Bill 76 is the vehicle that could become the framework for maybe a more of a larger approach to some of these issues. I really do think Ohio needs its version of a marshall Plan to get to some of these issues. For the young audience out there, the Marshall Plan was was a plan to rebuild Western Europe after World War Two. Young audience I'm thinking there might be just in case, at least just my kids listen. So in case they don't know about the Marshall Plan. So before we go, would you like to add any final thoughts for the audience, young or old? You know, I think the the thing that I've been emphasizing to people is this is central for everything else we want to do. If you it's hard to keep a job. If you don't have stable housing, it's hard to do well in school if you're constantly moving from apartment to apartment. And so for everything else, housing is fundamental. And the good news is there is money to be made. There are profits to be made in a much more sustainable way. There are genuine win wins in housing policy if we are just intentional and thoughtful about getting there. So it can be good for developers, it can be good for homebuilders, it can be good for landlords, and most importantly, it can be good for renters and homeowners and people. If we continue down this path of being really thoughtful about making sure that everyone has access to housing, that they both want to live in and can afford to live in. Amen to that. Totally agree. I subscribe to the the school of thought that, you know, it all boils down to housing is one of your largest expenses and that getting the absolute number or value of of rent and home prices down not just slowing the rate of increase is vitally important in this state. And, you know, I would say that, you know, as we go through this General Assembly, I know there will be talks of up study commissions and things like that, which I'm supportive of. But at the same time, I do think that, you know, it's such a, you know, dire problem, such an urgent problem that that we really should be working on this in a bipartisan fashion as we go along for the rest of this legislative session. And I know a number of people are understandably down on on politicians, the government generally. But but to see some relief on on an issue like this, I think would do a lot of good in reversing, you know, that attitude that a lot of people have towards government. And I think, again, we can we can get a lot of good work done in this General Assembly. Okay. Well, thank you again, Senator Blessing and Representative Isaacson for joining me today. One last thing. Let's go, Reds.