Report: Challenges Persist for Lower End of Housing Market

While the U.S. housing market has shown some improvements, such as the national homeownership rate increasing for the first time in 13 years, many challenges still persist, especially for lower-income Americans.

Almost one-third of all U.S. households have housing cost burdens, spending more than 30% of their incomes on housing in 2016. This includes about 20.8 million renter households, of which more than half are severely cost-burdened, paying over 50% of their incomes for housing, according to Harvard University’s Joint Center for Housing Studies’ (JCHS) The State of the Nation’s Housing 2018 Report.

Progress has been made with the number of cost-burdened households falling by 4.6 million between 2010 and 2016. However, the majority of these households—3.8 million—are owners with incomes higher than $45,000.

Whether an owner or a renter, households earning less than $30,000 suffer high housing cost burdens. In 2016, 80% of these lower-income renters were cost burdened, with 55% with severe cost burdens. For lower-income owners earning less than $30,000, 63% were cost burdened, with 42% with severe cost burdens.

In addition, households in the bottom income quartile have seen their housing costs rise and incomes fall between 2001 and 2016, leaving little left over for basic necessities, such as food and health care. According to the findings, the amount left over each month for these households declined from $730 to $590 in real terms over this period. The decrease was even more substantial for the lowest-income households with children, with just $490 left each month after housing costs.

“If incomes had kept pace with the economy’s growth over the past 30 years, they would have easily matched the rise in housing costs,” said Daniel McCue, a JCHS senior research associate and lead author of the report, which marks its 30^thanniversary. “But that hasn’t happened.”

Since JCHS’ first report in 1988, the number of very low-income families, those who earn 50% or less of the area median income, has increased by 6 million to over 19 million households. According to its findings, over the past three decades federally subsidized rental housing has increased by 950,000 units while low-cost stock with rents under $800 in real terms has fallen by approximately 2.5 million units.

The shortage of subsidized rental housing isn’t expected to lessen any time soon. According to the report, affordability restrictions on 533,000 low-income housing tax credit (LIHTC) units, 425,000 project-based Sec. 8 units, and 142,000 other subsidized units will expire within the next 10 years. This is in addition to the tax system overhaul at the end of 2017 that reduced the corporate rate as well as the value of LIHTCs—the nation’s largest source for affordable housing production—which will result in a decrease of units.

In addition to the shortage of housing, federal assistance is limited. Only one out of every four very low-income renter households receives federal housing assistance. The majority of the 4.6 million households who receive support are older adults, families with children, and households with an individual who has a disability.

Findings also highlight an increase in homelessness in 2017, after it had declined by 14% between 2010 and 2016. The Department of Housing and Urban Development’s (HUD's) latest assessment showed nearly 554,000 people were living on the street or in shelters on any given night in January 2017 during the point in time counts, up by 3,800 people from 2016.

To address households’ cost burdens and increase the production and preservation of safe, affordable housing, the report urges the federal government to enhance and expand the LIHTC and housing choice voucher programs as well as provide additional funding to the HOME and Community Development Block Grant programs.

“One of the most fundamental roles of government is to help people afford and get decent housing,” said Shaun Donovan, former HUD secretary, during the panel discussion after the presentation of report findings. “I believe strongly that the federal government and state and local governments have an important role.”

The report also cites that state and local jurisdictions have a role to play and can do so by reducing housing costs through regulatory reform. Donovan agreed, “If we don't get to the zoning and other land-use issues, we're never going to solve this problem. That was true 30 years ago, but that's even more true now.”

In addition to land-use reforms, JCHS executive director Chris Herbert said the nation needs to have reforms on production processes as well as innovations in financing streams to be able to create more affordable housing for low- and moderate-income households.

Another area of opportunity is preserving naturally occurring affordable housing (NOAH), where nonsubsidized rents are lower but at risk of increasing when land values escalate very rapidly, added Eric Belsky, director of the Federal Reserve System's Division of Consumer and Community Affairs and former JCHS managing director. “Those are opportunities where we might be able to help with rehabilitation. In many instances, those are communities ... that can provide the most affordable housing.”