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.

The high costs of building affordable housing and buyers’ willingness to purchase luxury homes that sell at higher prices tend to disincentivize builders from creating additional affordable housing and has contributed to the state’s affordable housing shortage. 

Hodgson said that increasing land and labor costs, lumber prices and transportation expenses are contributing to higher housing prices.

"We're building as affordable as we can, but again, the developer purchases everything or pays for everything to get the end product," Hodgson said. 

Construction and development proposals take time to get approved, he added. The time it takes to propose a project, wait for approval and then finally build and sell a house can also add to expenses.

Geographic restrictions also hinder developers in Reno and Las Vegas. There is little infrastructure to support housing that might expand city boundaries, and land outside of that usually falls under the federal Bureau of Land Management's jurisdiction. 

On the consumer side, insufficient affordable housing stock has ramifications for individuals' health, access to education, food security and the community as a whole, said Hess.

"When people are priced out, there's a whole cascade, right? The dominoes start falling," she said.

Though some fear another housing market crash, others say the worry is unfounded.

During a recent legislative meeting, Carson City Assessor Dave Dawley said he does not expect a similar housing bubble to pop in the near future but that some cooling off of the current market is likely in store.

"I do think there is going to be an adjustment that's going to happen in the real estate market," Dawley said. "Is it going to be as dramatic as it was back in 2008? I don't think so ... I only got through that whole bubble once so I can't really tell."

In contrast to the booming real estate market in the early-to-mid 2000s, Nevada’s high housing prices are not fueled by predatory lending, lack of sufficient regulation or negative equity. Most of the high costs have been driven by low supply, high demand and an imbalanced housing market.

“High home prices and improved lending practices mean most homeowners are sitting on equity, which pushes back on foreclosure fears,” Bonnenfant said. “Sure, some homeowners may be forced to sell, but they will not walk away.”

Experts also see continued demand on the horizon.

"In the North ... we've got 150 companies we're working with right now that are considering relocation to this region. So we see continued demand at least for the next five years, regardless of what happens nationally," Kazmierski said.

If the region cannot accommodate an influx of new employees, the companies will go somewhere else, Kazmierski said, taking potential revenue streams with them.

Regardless of what happens in the future, Hess said that the pandemic shined a light on the need to address Nevada's housing crisis and characterized the state as at a "tipping point."

"If we don't do something now and we are already behind, where are we going to be as a state? Who are our communities going to be, when the very people who work here can't live in them?" Hess said. "We aren't going to recognize our Nevada if we don't take care of ourselves.”

Past legislation

This session won’t be the first time the Legislature has approached the affordable housing topic in recent years.

In 2019, legislators passed SB103, a bill sponsored by Sen. Julia Ratti (D-Sparks) giving local governments the ability to reduce or subsidize impact fees for affordable housing projects. A proposed amendment to the bill discussed the concept of allowing local municipalities to adopt rent control policies, but the amendment never became part of the law.

“What I did in the last session was really about enabling local governments,” Ratti told The Nevada Independent. “The success of those kinds of initiatives will inevitably end up in the local government.”

So far, Reno is the only city in Nevada to implement SB103 — the city has had two projects request fee reductions or subsidies under the ordinance.

The projects include Springview by Vintage, a 180-unit affordable multifamily development, and Marvel Way Apartments, a 42-unit apartment project. Both projects are under review and scheduled to come before the city council in the coming months.

Ratti said the economic rollercoaster ride the state has experienced in recent years means that some tools may be less suitable today than when they passed through the Legislature. Still, at least local governments have some options for how they address housing needs.

“It would not surprise me if some of those tools have had fits and starts,” she said. 

Another bill passed by the 2019 Legislature, AB73, would have authorized a sewer surcharge and a tax increase on real estate property transfers to raise approximately $20 million designated to fund homeless services. But the bill was watered down and reduced to a local-scale venture ultimately requiring Clark County lawmakers to form a working group to address homelessness and submit recommendations to the Legislature by October 2020.

In September, The Nevada Current reported that the working group had presented a proposal (contingent upon more funding from the state) to increase housing capacity, meet mental and behavioral health needs and offer other needed services. No legislation addressing the recommendations has yet been proposed.

The state’s most high-profile 2019 effort to address the crisis allocated $10 million in tax credits for builders developing affordable housing — but rollout of that program has been slower than anticipated.

In a report on the tax credit program, Nevada Housing Division officials said the pandemic combined with the “newness of the program” slowed the initiative to a near halt.

The division received just one application during Fiscal Year 2020, but that application has not yet received approval and no affordable housing units were built as part of the program by the end of that fiscal year. 

Some lawmakers this session are hoping to remove the sunsets on the program and establish it in law to give it more time to grow.

Preserving existing affordable housing

In 2021, legislators are eyeing a variety of bills that would help alleviate Nevada’s housing crisis, one of which seeks to preserve affordable housing developments.

The state lost more than 1,000 affordable housing units in 2019 because of expirations on affordable housing designations, Nevada Housing Coalition Executive Director Christine Hess estimated.

“What good does it do if we're creating all this housing, but we're losing it out the back end?” she said. “Preserving existing affordable housing costs one-third to one-half the price of creating new affordable housing.”

Affordable housing units built under the federal Low-Income Housing Tax Credit program receive federal tax subsidies that partially offset construction costs for low-income housing projects. Federal law sets a limit on the income level of tenants, as well as on the amount of rent that landlords can charge them.

Property owners are required to maintain affordability (as defined by the terms of a tax credit agreement) for a timeframe of 15-30 years. At that point, owners can either renew the affordability status or drop the status and rent or sell it at market rate.

SB12, a bill put forward this session by the legislative advisory committee on housing, would require property owners with affordability restrictions that are subsidized and under the oversight of the Nevada Housing Division to notify local governments and tenants 12 months before they intend to let restrictions expire.

Lawmakers say this would give local governments the ability and time to react to affordable-designated units coming off of the market.

“When the economy is doing so well in terms of landlords, there's a temptation of course, to just flip those back to market,” Ratti said. “But there are lots of tools to help developers and to incentivize them keeping those units affordable. But we can only do that if we know that.”

The housing bill appears to have at least some bipartisan support.

“If it's purely a notification, I don't have any trouble with that,” former Nevada REALTORS Association President and newly elected Assembly member Heidi Kasama (R-Las Vegas) said. “Because then if through private foundations or government or local community leaders they can raise the funds and have time through a notification effort.” 

Developing more housing 

Lawmakers, advocates and builders agree that addressing the housing crisis does not exclusively mean building new affordable housing.

One bill that the Nevada Rural Housing Authority is working on with Ratti would allow housing authorities to build market rate housing units alongside affordable ones.

Bill Brewer, executive director of the Nevada Rural Housing Authority, said that lawmakers often focus on Las Vegas and Reno, but 20 percent of the state's population lives in rural areas — and there is little support for building affordable housing in those parts of the state.

"What we intend to do with this kind of a program is to have some units at market rent," Brewer said. "The revenue from those units that would help support the rent or provide rental assistance to some other households in that unit."

Brewer offered an example of mixed-income units that would involve renting 80 percent of units in a housing complex at market rates, and then using some money from those rents to subsidize the rest of the units.

"It'd be in the same housing complex, and so that's good from a social standpoint," Brewer said. "And then it also expands our ability to serve the people in rural Nevada without having to rely on funding from the federal government."

Ratti said that though the plan may seem "counterintuitive" for a group focused on increasing affordable housing, approaching the housing crisis with creativity is essential, and all options need to be on the table.

To develop more housing options, Sen. Dallas Harris (D-Las Vegas) recently introduced SB150, which requires local governments to allow tiny houses in areas zoned for single-family residences. 

The Southern Nevada Home Builders Association has a few ideas it wants lawmakers to consider as well.

Hodgson suggested fast-tracking affordable projects through the development process, seeking federal waivers to leverage federal health program dollars by designating affordable housing as a health care need and offering a density bonus for mixed-income developments.

One of the most considerable barriers to completing more affordable housing projects is land, Hodgson added. He said that getting more land from the Bureau of Land Management or acquiring municipality-owned land and then designating it for affordable housing would also help solve the problem.

The desire for more land came a step closer to fruition when Democratic Sen. Catherine Cortez Masto introduced a lands bill on Wednesday that would allow the Las Vegas metropolitan area to expand toward California while also setting aside substantial swaths of land for conservation and recreation. 

The Southern Nevada Home Builders Association lauded the bill as a much-needed step to addressing the state’s housing crisis, but many environmental activists are concerned that it would lead to development that could increase land degradation and contribute to ecological and climate-driven destruction.

Tools for local governments

To give local governments more tools and funding to address the housing crisis, the Nevada Housing Coalition is working with lawmakers on two bills, one of which opponents say would lead to increased costs for developers.

The most contentious proposal (not yet introduced in bill form) would allow local jurisdictions to require developers to follow inclusionary zoning policies stipulating that a certain percentage of new construction be affordable for lower-income households — or require a fee to avoid those requirements.

The proposal also includes an option for jurisdictions to adopt fees ranging from $1 to $10 for each square foot of commercial or residential development. The municipality or jurisdiction would determine the fee rate based on a study that analyzes the balance between the funding necessary to address affordable housing needs and possibly hindering future construction.

Local governments would first have to create an affordable housing plan detailing how the funds would be used before implementing fees. Money from fees would be stored in an affordable housing trust fund. 

Hess said that the proposals would operate similarly to legislation from 2019 that reduced impact fees for affordable housing developments, allowing but not mandating that local governments adopt the policy.

"By enabling these fees, communities will address ... their shortage of affordable and available rental housing … our limited housing diversity," Hess said. "What's cool is an affordable housing trust fund is not limited like federal funds are. You're using that as a community as you need."

The other proposal on the table would require jurisdictions with more than 100,000 people to establish five-year goals for producing affordable housing units. The idea would allow for increased communication and better long-term planning, Hess said.

Bonnenfant said he worries the plan could force developers to skip the “missing middle” and build more luxury homes to make up for added costs, creating a chasm between affordable and luxury housing.

No city in Nevada has inclusionary zoning ordinances.

During the 2019 session, Ratti submitted an amendment to SB103 to allow local governments to implement either inclusionary zoning or rent control policies. The amendment did not make it into the final iteration of the bill.

The Southern Nevada Home Builders Association said that fees in place of inclusionary zoning would shift the cost of housing subsidies onto new development — and likely reduce the number of built units, increasing housing prices overall.

Kasama said that though the concept makes sense, she worries about the burden extra fees will ultimately place on consumers.

“Is that harming the people we’re trying to help by adding a layer of costs?” Kasama said. “It's the consumer [who ends up paying for additional building costs] and that's the one we're trying to build affordable housing for.”

Disclosure: Mike Kazmierski serves on the Advisory Council of The Nevada Independent.