Housing & Homelessness Myths Busted: Naturally Occurring Affordable Housing

Last week, the Building Bridges blog post launched a new series devoted to unpacking some of the commonly misunderstood housing and homelessness terms and concepts. The first post in the series was dedicated to exploring and exploding some misperceptions around “Housing First.” These posts are inspired by the 2025 Charlotte-Mecklenburg Housing & Homelessness Strategy (CMHHS), which was launched in April 2021; and represents the first time that the public and private sectors have come together to comprehensively address the entire housing continuum, from housing instability to homelessness, in Charlotte-Mecklenburg.

As last week’s post highlighted, advancing widescale solutions – even the ones backed by research and data – also means overcoming obstacles that have historically gotten in the way. Some obstacles take the shape of myths and misconceptions.

This second post focuses on Naturally Occurring Affordable Housing (NOAH) including what it means; where it is and how it evolved; evidence supporting the approach; and ultimately, what this kind of approach can mean for Charlotte-Mecklenburg.

WHAT IS NATURALLY OCCURRING AFFORDABLE HOUSING (NOAH)?

Naturally occurring affordable housing (NOAH) is one type of affordable, permanent housing. Although there is no uniform definition for NOAH, it is generally defined as privately-owned and -operated rental housing units which do not require a subsidy or other financial assistance to make them affordable to lower income households. Because there is no subsidy attached to the units, NOAH is also referred to as “non-subsidized affordable rental housing.”

Often, NOAH units are described as “below market.” When NOAH units are truly “affordable,” they are serving tenants with income at or below 80% of an Area Median Income, and charging rents that are low enough that tenants do not have to pay more than 30% of their income on housing-related expenses.

As context, at the higher end of this income spectrum, 80% of Area Median Income is $47,150 for a single individual and $67,350 for a four-person family in the Charlotte-Mecklenburg MSA. This means that a single individual with income at 80% of Area Median Income should pay no more than $1,179 in monthly rent and utilities; and a four-person family at the same income level should pay no more than $1,684 in monthly rent and utilities.

Looking at the lower end of the income spectrum in the Charlotte-Mecklenburg MSA, 30% of Area Median Income for a single individual is $17,700; and for a four-person family is $26,500. At this income level, a single individual should pay no more than $443 in monthly rent and utilities; and a four-person family at the same income level should pay no more than $662 in monthly rent and utilities. The FY2021 Fair Market Value monthly rent for a 1-bedroom unit in our MSA is $1,010; a three-bedroom unit is $1,518.

WHERE IS NOAH?

There is not a publicly available database of historical and/or currently available NOAH units. The category of “low-cost housing” includes both NOAH and subsidized housing but can be a helpful proxy for understanding the current inventory.

According to a 2019 brief from the Joint Center for Housing Studies at Harvard University, the absolute number of low-cost units in the United States (renting under $600 inflation-adjusted per month) decreased by almost 4 million between 1990 and 2017. This translated to a decrease in the share of low-cost units from 46 percent of all rental stock in 1990 to only 25 percent by 2017. The 2020 Charlotte-Mecklenburg State of Housing Instability & Homelessness report shows a similar local trend: the share of low-cost rental units in Mecklenburg County (renting under $800 per month in 2018 dollars) decreased from 51% of the total rental housing stock in 2010 to just 25% of the rental housing stock in 2018.

The map below is taken from the Quality of Life Explorer, which contains data on social, housing, economic, environmental, and safety conditions in Charlotte and Mecklenburg County. The map visualizes the geographic distribution of rental costs in Mecklenburg County; the areas outlined in purple represent the rental units with median gross rents that are at the lowest end of the spectrum, defined as under $947 per month for rent and utilities.

HOW IS NOAH AFFORDABLE?

NOAH properties typically have a lower basis owing to the the fact they have been held by one owner for a long period of time and may not have an active mortgage. Generally, these properties do not receive significant capital reinvestment from their owners. This not to say that the units are not adequately maintained, necessarily; rather they may not be fully modernized or updated to reflect current trends.

Using real-estate terminology, NOAH properties are most often classified as Class “B” or “C” within the commercial multi-family housing type. Multi-family properties are defined as any properties that house more than one tenant. They can include townhouses, condominiums, apartments, and/or duplexes/triplexes.

If a building has four or more rental units, it is considered a commercial property because it can generate income. Commercial properties (including office buildings and malls) are rated, in descending order, from Class A to Class C (and even below). These classifications are based upon factors like the age and condition of the property; amenities; and tenant profiles. It is important to note that the assignment of a specific property can depend upon the source; are subject to change over time (such as when a property is renovated or as it ages); and mainly serves the purpose of informing investors relative to risk and potential returns.

Generally, Class A properties are at the “higher” end of the spectrum, with the highest rents and amenities such as pools, fitness centers, dog parks, and the like. Class B properties fall in the middle in terms of cost, quality, location, and amenities. Class C properties are at the “lower” end of the spectrum and are generally older, charge lower rents, and have fewer amenities.

To put this in our local context, LoopNet, a commercial property search tool, provides a few local Class C examples that are currently for sale:

WHY SHOULD COMMUNITIES CONSIDER NOAH AS PART OF AN APPROACH TO MAINTAIN AND/OR INCREASE INVENTORY?

NOAH units typically comprise the largest portion of any community’s available affordable housing inventory. Therefore, at bottom, communities should do everything they can to preserve these units as affordable. The most basic intervention is to incentivize current NOAH property owners not to sell, thereby maintaining the current basis of the property and preserve the current rental rates.

NOAH units are at high risk for acquisition and either reinvestment or redevelopment as higher end units. These actions to modernize or replace the existing housing stock leads to displacement for current tenants, either when they can no longer afford to live there or when the property is demolished for redevelopment.

For example, the properties highlighted above are actively being marketed for sale. To combat this, public and/or private entities can purchase NOAH properties to ensure they will remain affordable.

A 2020 Shelterforce article outlines three examples of funding options to purchase and preserve NOAH properties, incentivizing investors with returns while supporting the mission of long-term affordability. These include the NOAH Impact Fund, which is a social impact fund through a public-private partnership in Minnesota that has preserved over 700 units in two years and since launched a second fund; the Housing Partnership Equity Trust, a non-local “real estate investment trust owned and operated by nonprofits to preserve affordable rental homes for lower and middle income residents;” and the Washington Housing Initiative Impact Pool, a debt fund launched by JBG Smith in 2018 committed to NOAH preservation, deploying (to date) $21.8 million to preserve 1,151 units of affordable rental housing in the D.C. area.

SO, WHAT

Like with many communities, in Charlotte-Mecklenburg there is not enough housing at all price points for everyone who needs it. There is certainly not enough “affordable” housing.

Some studies state that for every new affordable housing unit created, two more are lost. This means communities are losing existing affordable housing – both subsidized and NOAH – at a rate faster than it can build new.

There are two major threats facing NOAH properties: one involves NOAH properties being bought and either redeveloped or improved with amenities that raise the rents to “unaffordable” rates; the second is when an already underinvested property fails to be adequately maintained and becomes uninhabitable. Both outcomes lead to displacement, which can lead to homelessness. This means that it is absolutely critical that communities invest in NOAH strategies that preserve and maintain existing NOAH inventory.

Charlotte-Mecklenburg has already started: the City of Charlotte’s Housing Framework embraces the practice of NOAH preservation; in fact, local Housing Trust Fund dollars can be used for the purpose of NOAH preservation. Last year, Charlotte investors announced a $58 million social impact fund, called the Housing Impact Fund, with the goal of preserving 1,500 NOAH units in the community.

Further, Mecklenburg County’s Evaluate Upstream Blueprint recommends NOAH preservation strategies as part of building an effective homelessness prevention system. These include:

• Develop a data-driven community strategy to identify NOAH sites
• Increase funding for property acquisitions and rehabilitation; ensure incorporation of plan for quality property management and maintenance
• Increase funding to acquire, rehabilitate and/or subsidize ”non-traditional” and non-residential buildings to be repurposed as single- and multi-family NOAH units
• Increase funding to maintain and/or expand NOAH homeownership
• Increase funding to integrate supportive services as needed
• Increase funding for expansion of critical home repairs
• Identify, educate, and incentivize NOAH owner /prospective NOAH investors

In addition to utilizing research and best practices from other communities, these local examples and strategies are being incorporated into the strategic planning work of CMHHS. Preservation is more cost-effective and less disruptive than new construction; ensuring that existing NOAH units are not lost must be a key component of any work to end and prevent homelessness.

Stay tuned for future posts covering common housing and homelessness-related misconceptions and myths.