The 50-unit Breckenridge Place is a new, affordable housing rental in Ithaca, N.Y. The structure will be Energy Star and LEED certified upon its completion early this year. PHOTO: Courtesy Holt Architects
As a demographic shift points to more demand for rental housing, the general expectation is that things will only get worse for affordability.
“We’re in the midst of the worst rental affordability crisis this country has known,” says Shaun Donovan, secretary of the Department of Housing and Urban Development (HUD). “What we have is a perfect storm that has wrought together longer-term demographic changes that are driving people to rental housing. On top of that you have people’s incomes getting crushed during this period.”
A record high 8.5 million low-income families are paying half their salary for rent, Donovan says, and it’s becoming a growing crisis as that number has jumped 43 percent from 2007.
In other words, one in every two households are paying more than 30 percent of their income on rent, and one in every four are paying more than half of their income on rent, according to this year’s Harvard Joint Center for Housing Studies’ America's Rental Housing: Evolving Markets and Needs report.
Significant erosion in renter incomes over the past decade has pushed the number of households paying excessive shares of their income to record levels, and assistance has failed to keep pace with the growing demand. Nearly half of renters surveyed by the report make below $30,000. And the renter share of moderate-income households, making up to $74,999 annually, is 37 percent.
More people will need rental assistance in the next 10 years, with estimates splitting the demographic between minority and aging baby boomer households.
“These are folks who typically need rental assistance,” says Erika Poethig, fellow and director of urban policy initiatives at the Washington, D.C.-based Urban Institute. “It looks bad now? It’s going to look worse in 10 years.”
Less than a quarter of very-low income renter households received assistance in 2011, a drop from 27.4 percent in 2007, according to HUD. The share of renters with severe cost burdens and the share without any assistance are rising.
“Why can’t we do for rental housing what we do for computer chips?” says Mark Calabria, director of financial regulation studies at the Washington, D.C.–based Cato Institute. “Why can’t we make it cheaper?”
Calabria says that advocates missed an opportunity to do something about defense spending during the sequester and to pool more money into rental affordability.
The report points out that the number of renters who qualify for housing assistance increasingly outpaces the assisted units. The number of potentially eligible households ballooned from 15.9 million in 2007 to 19.3 million 2011, while the number of very low-income renters benefiting from some form of support only increased from 4.4 million to 4.6 million.
The housing voucher program has been the main vehicle for expanding assistance. “Between 1997 and 2004, increases in funding and improvements in program management helped to lift the number of vouchers by some 649,000. But despite a 12 percent increase in outlays for the program from 2007 to 2012, higher market rents and utility costs—along with income losses primarily resulting from recession-induced unemployment—raised the per tenant cost of vouchers, thus leaving the number of assisted renters almost unchanged,” says the report.
And though there were additional units made available in this last period where housing authorities were able to use their vouchers to serve tenants, the resources weren’t enough.
“That was like squeezing every single unoccupied unit,” Poethig says “We’ve reached as far as we can, and with absent resources, that divergence is going to get greater.”
Experts advocated that a change in tax code might be the right avenue. The country will not be able to grow effectively, Calabria says, if we don’t invest more in our rental program. The elastic supply is great for landlords, but “it’s not great for tenants, not great for the federal budget,” he adds.
“I’d’ like to see a bit more [investment] flowed to the tenant,” Calabria says.
While citing the success of the low-income housing tax credit (LIHTC), the study says the program can be improved to reach the lowest-income households and work more efficiently with other housing programs. “But eliminating or significantly curtailing this program would create a substantial void in affordable housing production and preservation—and at the expense of one of the most successful efforts on record in terms of sound financial performance and delivery of good-quality rentals,” says the report.
The lack of affordable rental housing results in tough choices for families. In order to pay their monthly rents, low-income households are often forced to cut back on other essentials, including food and health care.
“The tradeoff is unthinkable,” Poethig says. “[We need to] come up with solutions that serve demographic groups equally. Are we building more multigenerational communities? Can we rethink policy debate? Because both groups (minorities and seniors) need and benefit from rental housing.”