By: John Griffith | Twelve points that make the case for change
The promise of economic mobility – that a child growing up in poverty can work her way up the income ladder – has always been an essential part of the American Dream. For millions of renters in this country, however, that promise has not been fulfilled. Here are 12 reasons we need a smarter, more balanced housing policy in America:
1. The number of Americans living in high-poverty neighborhoods—places that are often cut off from jobs, good schools and other opportunities—has nearly doubled since 2000. The problem hits communities of color particularly hard: more than one in four poor blacks and nearly one in six poor Latinos live in high-poverty neighborhoods, compared to just one in 13 poor whites.
2. There are several factors driving this increase—some economic, some social—but one crucial driver is the rising cost of living. Over the past decade, wages have stagnated for most low- and moderate-income workers while rents have steadily risen, especially in high-demand markets with the most job opportunities. This has left many lower-income households with no choice but to live in neighborhoods with poor-quality housing, rampant crime, bad schools and few jobs.
3. In the wake of the recent foreclosure crisis, a growing number of Americans are turning to the rental market—some by choice, some because they have no other option due to excessively tight credit standards for mortgages. The U.S. homeownership rate currently stands at 63.8 percent—near a 30-year low—and researchers at the Urban Institute expect the rate to keep falling as the number of new renters outpaces the number of new homeowners.
4. Meanwhile, a growing number of low-income renters are competing for an increasingly scarce supply of affordable rental homes. Construction of new rental housing is not keeping up with the rising demand, especially at the lower end of the market, creating a growing supply gap. According to the Urban Institute, for every 100 renter households with extremely low-incomes—meaning they earn less than 30 percent of AMI—there are only 28 units that are both adequate and affordable to them.
5. As a result, America’s renters are spending an unprecedented portion of their income on housing. In 1960, 12 percent of renters paid more than half of their monthly income on rent. Today, that number is higher than one in four—down slightly from the recent recession of 2010 but vastly higher than was typically the case. Caught in this situation, families have to make difficult tradeoffs simply to keep a roof over their heads. Many are just one unforeseen event—an illness, a job loss, even a drop in hours at work—from seeing an eviction notice on their front door.
6. Absent meaningful changes to public policy, we expect America’s rental affordability crisis to only get worse in the years to come. According to projections from Enterprise Community Partners and the Joint Center for Housing Studies, even if rent growth matches income growth, the number of housing insecure renters is expected to increase by about 1.3 million households over the next decade—an increase of over 10 percent.
7. Here’s the good news: we already have many of the tools necessary to solve this problem. Over the past several decades, policies like Section 8 rental assistance vouchers and Low-Income Housing Tax Credits have proven effective at keeping low-income families stably housed, even those who are at serious risk of becoming homeless. For example, a recent study from HUD found that families leaving homeless shelters with a Section 8 voucher were more than twice as likely to remain stably housed and avoid a foster care placement compared to families leaving shelter without a voucher.
8. Despite all this evidence of effectiveness, these crucial affordable housing programs remain woefully underfunded. As the number of extremely low-income renter households has risen in recent years, federal spending on rental assistance has actually decreased. As a result, today only 23 percent of households who are eligible for federal rental assistance actually receive it, leading to decade-long waiting lists and lotteries for rare openings.
9. While millions of low-income renters go unassisted, we’re spending tens of billions of dollars each year to subsidize the mortgages of high-income families who don’t need government support. For example, the government spends about $100 billion each year on the mortgage interest and property tax deductions, and more than three-quarters of those subsidies go to households making more than $100,000 per year, while more than a third goes to households making more than $200,000 per year.
10. Given the problems facing America’s renters, it’s clear that we need to recalibrate our priorities for housing policy. This year the federal government will spend more than $140 billion to help people buy homes, but only $55 billion to help people rent them. That’s despite the fact that the typical homeowner’s income is more than double that of the typical renter.
11. Of course, not all housing policies are decided at the federal level. State and local governments set land-use restrictions and other rules that can either support or unnecessarily constrain the creation of affordable rental housing, with a significant impact on housing costs. A 2003 study from the National Bureau of Economic Research estimated that restrictive zoning codes, density requirements and other land-use regulations imposed “regulatory taxes” of at least 10 percent in some of the country’s most expensive cities, including New York, San Francisco, Los Angeles, Boston and Washington, DC.
12. A more balanced housing policy is a crucial part of the solution, but systemic problems like concentrated poverty and housing insecurity cannot be solved through housing policy alone. In order for families to remain stably housed in a decent neighborhood, they need to earn an income that reflects the actual cost of living in that community. For example, according to the National Low-Income Housing Coalition, in no state can a full-time, minimum-wage worker afford a one-bedroom unit at fair-market rent.
For more background on America’s rental housing crisis and a summary of the federal, state and local policy changes needed to address it, see An Investment in Opportunity, a new report published earlier this month by Enterprise Community Partners. You can explore all 23 of the policy recommendations here, or you can download the full platform here.
John Griffith is a Senior Analyst and Project Director at Enterprise Community Partners, a national organization that helps to finance, build and advocate for affordable housing for low-income families.