As housing costs outpace wages, LISC’s Michael Pugh calls for action

Editor’s note: This conversation has been edited for length and clarity.

Sarah Wolak: Out of all the pressures facing affordable housing today, what do you think is the most immediate threat to preserving stock?

Michael Pugh: One is simply the rising cost associated with housing. What we know today is that some of the data is telling us that the average age of individuals who can afford to buy their first home is now over 40 years old. That’s a significant indicator and a reflection of a paradigm shift that has happened in our nation related to affordability.

We have the rising cost of creating new housing inventory and the rising costs associated with preservation. That’s largely tied to things like insurance costs, utility and energy costs, and the overall ability to build, create or preserve housing when supplies are simply costing so much.

I would put it simply: American residents today are struggling to pursue the dream of homeownership, and that is largely tied to the fact that the cost of ownership is becoming so burdensome.

We also know that a significant portion of American residents are cost-burdened, with more than 40% of their income going toward housing. Once you’ve paid your rent or mortgage, how do you then address other expensive necessities like child care, health care and transportation? Those are all issues that are impacting families today.

Wolak: When you think about the wealth gap, the growing age gap among homebuyers and declining purchasing power among younger Americans, what concerns you most?

Pugh: What troubles me most is that the issue isn’t getting better, and there haven’t really been meaningful solutions put on the table to address it. We’ve seen data suggesting there’s a housing shortage of as many as 7 million units across the nation. We also have an aging housing infrastructure, with more than 40% of our current inventory being 40 years old or older.

Our report found that 69% of Americans are very concerned about housing costs. When you consider that the income needed to afford a median-priced home has nearly doubled from about $68,000 in 2020 to roughly $130,000 in 2025, that’s a significant challenge.

What has worked in the past is that we have been able to, as a nation, bring public and private dollars together to create incentives, tax credits or other meaningful ways that allow American residents to get into homes and pursue their dream of homeownership.

I think we’ve seen in the past that the path to closing some of the wealth gap and achieving a meaningful outcome for families is through the equity in their overall homeownership. And what we’re experiencing now is leveled or fewer dollars that are made available at the public contribution side … coupled with the problem being exacerbated because the cost of living is just outpacing the overall income and affordability.

Wolak: You bring up the shortage of more than 7 million affordable housing units. Do you think meaningful progress is being made, or is the shortage continuing to grow?

Pugh: I think the shortage is continuing to grow. There have been meaningful efforts; it’s worth noting that we’ve seen federal support through the New Markets Tax Credit and the Low-Income Housing Tax Credit (LIHTC). These are important federal subsidies that allow for the creation and preservation of communities across our country in terms of helping to address quality affordable housing.

But we have an issue that’s bigger than the federal subsidies that have been provided. There is a need to galvanize support from the investor community and encourage investors to help preserve affordable housing stock. Some data suggests that by 2030, as much as 50% of the housing inventory could be owned by investors.

When you think about markets or areas like the Midwest, there are neighborhoods and communities that are largely owned by investors, and once an investor then develops somewhat of a significant scale, they have the opportunity [to] flip into market grade within certain communities. They can seismically change the affordability at local levels within communities, and so I think there’s continued opportunity to work between the public and private sectors with the investor community on that.

One piece of legislation LISC strongly supported is the Neighborhood Homes Investment Act (NHIA). It was designed to help bridge the gap between investors and affordable housing as another solution to address this issue.

We’re also calling on the private sector to think about the concentric circle related to or tied to workforce development and workforce housing. As we continue to try and tackle this issue, I think companies will want to look at proximity of their locations — whether it’s factories or headquarters — and think about the housing inventory and stock in those areas.

They should consider investing in the skill set of those communities to build workforces internally that ultimately will be able to create, be able to preserve and participate in homeownership, so that they are working and living in the neighborhoods and driving economic development within those communities.

Wolak: With housing being a bipartisan issue, what policy changes do you think would have the biggest impact on affordability over the next several years?

Pugh: One positive development is that we’ve seen greater permanence for the New Markets Tax Credit and additional support for the Low-Income Housing Tax Credit. That sends a signal that policymakers understand this is a real issue.

But as we continue thinking about affordability, we also have to focus on energy costs and insurance costs. We need to ask whether we can bring industry leaders together to address these issues. Energy costs, environmental sustainability and insurance expenses are all connected. Some areas are deemed higher risk because of severe weather, which drives insurance costs higher. It’s about weatherization, resilience and protection.

The solution isn’t simply giving everyone a free home. We know that’s not realistic. The question is, how do we close the affordability gap and bring industry leaders together as part of the solution? That’s an area where federal leadership could play a meaningful role.

Wolak: You’ve worked in community development for many years. Is today’s environment the most challenging you’ve seen, or is it simply a different set of obstacles?

Pugh: Within the Community Development Financial Institutions (CDFI) sector, there have been many different challenges over the years. During the pandemic, CDFIs like LISC were truly financial first responders. We focused on helping small businesses that were on the brink of failure because we understand that small businesses account for more than 40% of the nation’s GDP.

We’ve also worked on issues tied to health and social determinants, making sure communities weren’t left behind simply because of their ZIP code — whether they were rural, suburban or urban. What we’ve understood within the CDFI sector is that our goal is to address broader systemic issues that improve the nation’s economy. It’s not focused on any one group of people or any one neighborhood.

We’re trained to understand the broader issues and create scalable solutions that address them. In LISC’s case, because of our size and scale, we work across the entire country, with a particular focus on rural communities, where we often see shortages of healthy food options, health care access and quality affordable housing.