The Affordable Housing Crisis, Housing Instability, and Uncertainty
Krista O’Connell
Homeownership is a bedrock of the American Dream, but more and more families are struggling to rent a home, much less own one. Rising incomes have not kept pace with rising rents, creating a national affordable housing crisis. When renters experience housing instability from spending a disproportionate amount of their income on rent, moving often, or living in distressed housing, it can have devastating effects for adults and children—often culminating in uncertainty about the future.
While federal rental assistance programs seek to alleviate this problem, the demand far outstrips the supply. The affordable housing supply also hasn’t able to keep up with the demand for low-income housing. Advocates have called for expanding assistance programs and increasing the affordable housing stock. No matter the policy action, something must be done to address this growing crisis.
The Affordable Housing Crisis
The Department of Housing and Urban Development (HUD) considers families who spend more than 30 percent of their income on rent to be “cost-burdened.” As the minimum wage stagnates and housing costs increase, paying rent is becoming harder and harder to do. Each year, the National Low-Income Housing Coalition calculates the The National Housing Wage, or the hourly wage needed to afford a two-bedroom house without spending more than 30 percent of income on housing. According to the most recent calculation, the wage has risen steadily since 2005 to $21.21 in 2017. Although the wage varies by city and state, nowhere is the minimum wage high enough to meet or exceed the National Housing Wage.
As the National Housing Wage has increased, so has the number of households classified as having worst case housing needs, which reached 8.30 million households in 2015. HUD defines worst case housing needs as those who are very low-income (make less than 50 percent of the Area Median Income), do not receive government rental assistance, and spend more than half of their income on rent and/or live in distressed housing. HUD attributes recent growth in worst case housing needs primarily to families who have shifted from homeownership to renting. Additional factors include new household formation, rising rents that have outpaced rising incomes, and the widening gap between the demand for and supply of housing assistance programs.
Affordable housing is most difficult to find for those who need it most. According to HUD’s 2017 Worst Case Housing Needs Report to Congress, there are only 33 available and adequate housing units for every 100 extremely-low income renters, with shortages of available and adequate units for very low-income and low-income renters as well.
Eviction and Housing Instability
When housing costs rise and eat into the reset of a household’s budget, it can have devastating effects on the family, with less money for food, clothing, medicine, and transportation. This includes consequences for households’ mental and physical health: tenants who fall behind on their rent are more likely to experience depression and children who live in unstable or poor housing conditions are more likely to have developmental delays. While the affordable housing crisis is a crisis in and of itself, it often cumulates into even more chaos: eviction.
Exact figures on eviction are unknown, but it is estimated that many millions of families are evicted each year, with poor, women, and minority tenants most likely to be evicted. In his titular book, Evicted, Matthew Desmond chronicles how eviction causes poverty as much as it is a result of poverty. He equates the eviction crisis for black women with the incarceration crisis for black men.
As documented in Evicted, eviction is costly and time-consuming: the process of looking for housing and going through eviction court takes time away from working, and defendants’ risks losing work hours or even their job as they navigate this process. Many tenants elect not to represent themselves in court for that reason. When eviction day comes and tenants are marshalled out of their home, their belongings can be confiscated and stored in expensive storage facilities.
After families are removed from their home, they begin a cycle of moving that is rooted in uncertainty about the future. Throughout the process changing addresses, many families have important mail sent to the wrong address, thus missing important notices (for example, Desmond describes a mother who lost her welfare benefits because she didn’t receive a letter that was sent to her old house). In addition to this material hardship, evicted mothers are more likely to suffer from depression, stress, and poor health.
For children, moving means enrolling in new schools and losing access to their network of friends and caring adults. Moving three or more times before the age of five is associated with increased attention and behavioral problems in poor children. At the end of it all, many families end up homeless, as it is extremely difficult to approved for new housing, as evictions will show up in background checks.
Public Policy Solutions
Policy proposals aimed at addressing the affordable housing crisis exist at the federal, state, and local level and can broadly be divided into demand-side programs such as housing vouchers and supply-side programs that increase the affordable housing stock. Both are important to addressing the complex causes of housing instability.
The Housing Choice Voucher program is the HUD’s largest rental assistance program for low-income renters. After finding a unit that can pass an inspection and that is below the fair market rent limit, tenants receive a voucher to cover any portion of the rent above 30 percent of their income. The demand for this program is great; in many cities, the waitlist is closed or years long, and three out of four low-income, at risk families do not receive rental assistance. Different coalitions have called for expanding the voucher program with various tweaks, from helping families use their vouchers to move to better neighborhoods to giving households more time and leeway in their vouchers.
Expanding rental assistance programs will help households reduce the amount of money that they spend on rent, but it doesn’t address the affordable housing supply shortage. The government has been an important source of low-income housing, but the public housing stock has declined by 20 percent since 1994. Since then, the private market has filled in through the Low-Income Housing Tax Credit (LIHTC), through which the IRS has incentivized the creation of affordable units by having private developers compete for tax credits dependent on the percentage of units they reserve for affordable housing units in new developments. However, LIHTC units have a serious preservation problem: they are only guaranteed to remain affordable for 15-30 years.
On the local level, Emily Hamilton of the Mercatus Center identifies local policies that limit the supply of affordable housing: restrictive zoning laws, onerous land use regulations, and complex construction approval processes. Zoning laws, in particular, limit where multifamily housing can be constructed, not only decreasing the supply of affordable housing, but also keeping low-income families out of the best neighborhoods. Some advocates refer to the exclusionary zoning practices of wealthy neighborhoods as NIMBYism or “snob zoning” and equate it to modern day housing segregation. Hamilton also argues that unless the affordable housing supply problem is adequately addressed, the Housing Choice Voucher program will only get more and more costly for HUD as rents rise.
Where will the money come from? Contrary to popular belief, the federal government actually spends more money subsidizing homeowners than renters, so advocates have proposed starting there. According to the Center of Budget and Policy Priorities, “[home]owners received more than 70 percent of federal housing subsidies, despite making up less than two-thirds of all households and just 40 percent of those with severe housing cost burdens.”
In particular, Michael Desmond and other advocates have proposed ending or reforming the Mortgage Interest Deduction (MID) which costs $71 billion per year. MID enables households to deduct mortgage interest from their taxes, largely benefiting upper-class families with large mortgages who itemize their deductions. Many have called for capping MID at $500,000, which shouldn’t affect homeownership rates, but it would decrease the property values and mortgages for expensive homes.
Redistributing the budget is sure to be politically difficult, but maintaining the status quo has failed the three-fourths of low-income renters who are in need of assistance but do not receive it. Without increasing the minimum wage, rental assistance, or affordable housing supply, the affordable housing crisis and consequences of housing instability are only poised to continue.
