For developers and apartment owners who can provide decent affordable housing, the opportunity to do so may be bigger than ever, according to a report published this past spring by the Harvard Joint Center for Housing Studies (JCHS).

The main takeaway from the study, “ America's Rental Housing: Meeting Challenges, Building on Opportunities,” is that it's now harder than ever for the average renter to afford shelter. In fact, one in four renters, or 10.1 million households, spends more than half his or her income on rent and utilities. Another 26.2 percent of renters spend 30 percent to 50 percent of their income on these two items.

“The affordability problems are increasingly affecting Americans of more than just modest means,” said Eric S. Belsky , managing director of the JCHS and an author of the study, at the event introducing the report in Washington, D.C.

The effects of this affordability problem, which hits hardest the lowest people on the income scale, can have a wide-ranging impact on not only the individuals involved but on society as a whole. Though there are some solutions, it's going to take a lot more work to turn things around. And it looks fairly certain that the situation will get worse before it gets better, the report notes.

The Triple Whammy

While three-fourths of renters in the bottom quartile are facing severe housing burdens, more lower middle-income and middle-income renters are facing moderate burdens, the report found. The number of lower middle-income renters paying 30 percent to 50 percent of their income for rent and utilities jumped from 38 percent to 56 percent, while the number of middle-income renters in the same situation jumped from 10 percent to 23 percent over the past decade.

Affordability has been growing as an issue for the past 50 years but intensified over the past decade with the “triple whammy” of rising rents, rising utility costs, and falling renter income. In the 1960s, only a quarter of American renters faced cost burdens, and only 12 percent faced significant burdens. By 2009, half of American renters faced cost burdens.

“We have had a consistent, decades-long struggle for renters to afford housing, but that has been exacerbated by this [recent financial] crisis,” said HUD secretary Shaun Donovan in his keynote address at the Harvard event.

A lack of affordable housing hurts quality of life all around. With so much of their income going to housing, renters are often forced to make concessions in other areas. “To spend half of your income on housing means you have very little to spend on anything else," Belsky said.

Chris Herbert , JCHS' director of research and a co-author of the study, said burdened families have 37 percent less to spend on food, 52 percent less to spend on clothing, 52 percent less to spend on health care, and 71 percent less to spend on transportation. “When you talk about low levels of spending as it is, this has a profound impact on a household's well-being,” he said.

A Worsening Problem

The affordability problem is expected to intensify in the coming years with little new supply being introduced and new renters, whether 20-somethings or foreclosed homeowners, entering the market. While good news for landlords, these trends could push rental affordability out of reach for many, particularly in America's high-cost cities. “In the near term, the affordability issue will worsen," Herbert said.

Causing further strain is shrinking supply. The Harvard report says that since the mid-1990s, more than 700,000 subsidized rentals have been lost from the housing stock. Nearly 12 percent of the low-cost rentals existing in 1999 were lost from the housing stock by 2009. And rental housing stock is older than ever before, with a median age of 38 years. “We can't [even] keep the housing we already have,” Herbert said. “It's a drain on affordable housing."

With rising land costs and other issues in play , adding new supply is getting harder than ever. In the 1970s, the country added 300,000 subsidized units a year. In the past five years, however, that figure has dropped to 75,000 units annually. In the past five years as well, the number of renters has risen by 4 million, creating a notable housing gap.

Much of the affordable housing out there (such as foreclosed single-family homes), for many renters, isn't in areas near job centers.

“We don't have enough rental housing in the right places,” Donovan said. “The places hardest-hit were the least close to transit and schools."

John K. McIlwain , senior resident fellow at the J. Ronald Terwilliger Chair for Housing at the Urban Land Institute (ULI) in Washington, D.C., agrees. “Housing prices are down, but incomes are flat,"

he says. “Anyplace near metro areas and, in most cases, the housing prices are still very high. It varies from location to location. As a national matter, the cost of living [when you add housing and transportation] is rising much faster than incomes."

Tough Fix

With the federal budget tightening and local and state budgets strained, it's becoming more difficult to find affordable rental housing. One-quarter of people eligible for rental housing assistance receive it, according to Belsky, but fixing the affordability gap is the problem. McIlwain looks to the local level for help, where ULI has been advocating inclusionary housing programs, specifically regarding workforce housing.

“Local government has programs that are helpful to some extent,” he says. “We've been working with local governments to develop plans and programs to encourage the development of more rental housing and more workforce housing."

Municipal budget constraints often make it hard for these governments to help, though. On the federal side, the Low Income Housing Tax Credit ( LIHTC) remains, but there's concern about its future. The Harvard report acknowledges that, by themselves, tax credits “cannot bring rents down to levels that extremely low- and very low-income households can afford.” (Donovan says there will be “an urge to play defense” with the LIHTCs, which are the third-most-popular corporate deduction.) In some cases, it may be best for federal and local governments to loosen regulations and make it easier for affordable developers and renovators to do their work. But Donovan insists the government can help solve affordability by financing housing programs and establishing income curves that reach more workforce housing.

“We must think bigger, go farther, and take a series of steps,” he says.


THE RECENT JCHS report “America's Rental Housing: Meeting Challenges, Building on Opportunities" identifies three hurdles in particular that hinder rental affordability:

LIHTC LIMITS: The Low Income Housing Tax Credit program caps eligibility at 60 percent of area median income (AMI). That's not good for households at or above this threshold who are experiencing increasing cost burdens.

AGING STOCK: The JCHS report says the median age of rental housing stock is now 38 years, higher than ever. That stock, which typically is affordable without subsidies, is also more in danger than ever. “As housing ages, owners must devote an increasing share of rents to maintenance and replacement of systems ”¦ ,” the report states.

RENTER COMPETITION: Falling incomes and increased competition from higher-income renters hurt. In 2003, 16.3 million very low-income renters competed for 12.0 million affordable and adequate rentals. By 2009, the number of these renters had risen to 18.0 million as the number of affordable, adequate, and available units fell to 11.6 million.