Tag Archives: American Community Survey

The Missing Piece in The Affordable Housing Puzzle

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The National Low Income Housing Coalition has posted The Gap: A Shortage of Affordable Homes. The report opens,

One of the biggest barriers to economic stability for families in the United States struggling to make ends meet is the severe shortage of affordable rental homes. The housing crisis is most severe for extremely low income renters, whose household incomes are at or below the poverty level or 30% of their area median income (see Box 1). Facing a shortage of more than 7.2 million affordable and available rental homes, extremely low income households account for nearly 73% of the nation’s severely cost-burdened renters, who spend more than half of their income on housing.

Even with these housing challenges, three out of four low income households in need of housing assistance are denied federal help with their housing due to chronic underfunding. Over half a million people were homeless on a single night in 2017 and many more millions of families without assistance face difficult choices between spending their limited incomes on rent or taking care of other necessities like food and medical care. Despite the serious lack of affordable housing, President Trump proposes further reducing federal housing assistance for the lowest income households through budget cuts, increased rents and work requirements.

Based on the American Community Survey (ACS), this report presents data on the affordable housing supply, housing cost burdens, and the demographics of severely impacted renters. The data clearly illustrate a chronic and severe shortage of affordable homes for the lowest income renters who would be harmed even more by budget cuts  and other restrictions in federal housing programs. (2, citations omitted)

The report’s key findings include,

  • The nation’s 11.2 million extremely low income renter households account for 25.7% of all renter households and 9.5% of all households in the United States.
  • The U.S. has a shortage of more than 7.2 million rental homes affordable and available to extremely low income renter households. Only 35 affordable and available rental homes exist for every 100 extremely low income renter households.
  • Seventy-one percent of extremely low income renter households are severely cost-burdened, spending more than half of their incomes on rent and utilities. They account for 72.7% of all severely cost-burdened renter households in the United States.
  • Thirty-two percent of very low income, 8% of low income, and 2.3% of middle income renter households are severely cost-burdened.
  • Of the eight million severely cost-burdened extremely low income renter households, 84% are seniors, persons with disabilities, or are in the labor force. Many others are enrolled in school or are single adults caring for a young child or a person with a disability. (2, citations omitted)

While the report does show how wrongheaded the Trump Administration’s proposed cuts to housing subsidies are, I was surprised that it did not address at all the impact of local zoning policies on housing affordability. There is no way that we are going to address the chronic shortage in affordable housing by subsidies alone.

The federal government will need to disincentivize local governments from implementing land use policies that keep affordable housing from being built in communities that have too little housing. These rules make single family homes too expensive by requiring large lots and make it too difficult to build multifamily housing. We cannot seriously tackle the affordability problem without addressing restrictive local land use policies.

The Gap in Affordable Homes

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photo by Kenneth Frantz

The National Low Income Housing Coalition posted a report, The Gap: A Shortage of Affordable Homes. The report opens,

For the first time since the recession, U.S. household income increased significantly during 2015. Gains were seen even among the lowest income households, with the poverty rate declining from 14.8% to 13.5%. Millions of people, however, continue to struggle economically. Household income for the poorest 10% of households remains 6% lower today than in 2006, and more than 43 million Americans remain in poverty, many of whom struggle to afford their homes.

Each year, the National Low Income Housing Coalition (NLIHC) measures the availability of rental housing affordable to extremely low income (ELI) households and other income groups. This year’s analysis is slightly different from previous years in that NLIHC adopted the federal government’s new statutory definition for ELI, which are households whose income is at or below either the poverty guideline or 30% of their area median income (AMI), whichever is higher. Based on 2015 American Community Survey (ACS) data, this report provides information on the affordable housing supply and housing cost burdens at the national, state, and metropolitan levels. This year’s analysis continues to show that ELI households face the largest shortage of affordable and available rental housing and have more severe housing cost burdens than any other group. (2, citations omitted)

The report’s key findings include:

• 11.4 million ELI renter households accounted for 26% of all U.S. renter households and nearly 10% of all households.

• The U.S. has a shortage of 7.4 million affordable and available rental homes for ELI renter households, resulting in 35 affordable and available units for every 100 ELI renter households.

• Seventy-one percent of ELI renter households are severely cost-burdened, spending more than half of their income on rent and utilities. These 8.1 million severely cost-burdened households account for 72.6% of all severely cost-burdened renter households in the U.S.

• Thirty-three percent of very low income (VLI) renter households; 8.2% of low income (LI) renter households, and 2.4% of middle income (MI) renter households are severely cost-burdened.

• ELI renter households face a shortage of affordable and available rental homes in every state. The shortage ranges from just 15 affordable and available homes for every 100 ELI renter households in Nevada to 61 in Alabama.

• The housing shortage for ELI renters ranges from 8,700 rental homes in Wyoming to 1.1 million in California. (2)

It is of course important to talk about this gap as an affordable housing issue, but as I have written before, it is as much an income problem as a housing problem. It’s not just that the rent is too damn high, but that the paycheck is just too damn low.

I don’t see anything on the political horizon that will address this fundamental set of problems, but we should at least identify it properly so we can work toward a solution when the time is right.

Homeownership in NYC

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photo by Nathan Hart

Brooklyn’s Charles Millard Pratt House

NYU’s Furman Center and Citi have released their joint Report on Homeownership & Opportunity in New York City. It opens,

In New York City, the notoriously high costs of rental housing are well documented. But becoming a homeowner in the New York City real estate market is also a considerable challenge for low- to middle-income households. Households earning less than $114,000 face a severely constrained supply of homeownership opportunities in New York City.

This report seeks to shed light on the extreme variation in homeownership rates among New Yorkers and quantify the homeownership options that exist at different income levels. We do this by analyzing 2014 home sales prices and examining the potential purchasing power of households at various income levels in New York City, as well as in the nearby counties of Nassau, Suffolk, and Westchester.

We use five income categories for this analysis—Low-Income, Moderate-Income, Middle-Income, NYC-Middle-Income, and High-Income. These income bands are based on percentages of Area Median Family Income (AMFI) for the New York City metropolitan statistical area established by the Federal Financial Institutions Examination Council (FFIEC) and are based on data from the 2006-2010 American Community Survey. This report includes an additional middle-income band (NYC-Middle-Income), given that affordable housing programs in New York City serve households up to 165 percent of the U.S. Department of Housing and Urban Development (HUD) area median income (AMI). (3)

You’re all wondering, of course, what NYC-Middle Income is, so the report provides the following explanation of the income categories:

“Low-Income” households have an annual income of $34,000 or less, or 50 percent of AMFI;

“Moderate-Income” households have an annual income between $34,001-$55,000, or 50 percent to less than 80 percent of AMFI;

“Middle-Income” households have an annual income of $55,001-$83,000, or 80 percent to less than 120 percent of AMFI;

“NYC-Middle-Income” households have an annual income of $83,001-$114,000, or 120 percent to less than 165 of AMFI; and

“High-Income” households have an annual income above $114,001, or 165 percent of AMFI or greater. (3, emphasis added)

The report finds that

the purchasing power of most New York City households is limited, largely due to growing housing prices and stagnating incomes since 1990. In addition, while New York City had a relatively low share of homeowners compared to the U.S. in 2014, it was disproportionately low for Low-Income and Moderate-Income households relative to their U.S. counterparts.

The vast majority of home sales in New York City in 2014 were at prices unaffordable to Low-Income and Moderate-Income households, which comprised 51 percent of New York City households. Of the nine percent of sales in the city affordable to these households, three percent were affordable to Low-Income households and an additional six percent were affordable to Moderate-Income households. Home sales with prices that were affordable to Low-Income and Moderate-Income households in 2014 were, for the most part, concentrated outside of Manhattan.

Prospects for homeownership were not much better for Middle-Income households. In 2014, Middle-Income households, which comprise 15 percent of New York City households, could afford an additional 13 percent of sales (based on a total purchase price of up to $364,000), leaving 78 percent of sales out of reach for households with incomes of less than $83,000 annually. Less than half of sales in 2014 (42%) were affordable to 77 percent of New York households, including those characterized as NYC-Middle-Income.

Moving outside of New York City does not necessarily improve a New York City household’s potential to buy a home. In Westchester County, only two percent of sales were affordable to New York City Low-Income and Moderate-Income homebuyers combined in 2014. In Nassau County, only 24 percent of sales were affordable to New York City Low-Income, Moderate-Income, and Middle-Income homebuyers in 2014. In Suffolk County, 42 percent of sales were affordable to New York City Low-Income, Moderate-Income, and Middle-Income households. (4)

New Yorkers, and a lot of non-New Yorkers, are going to eat up the graphs in this report (what IS the median sales price in Brooklyn?!?), so it is worth a read for the real estate obsessed (yes, you). But it also has policy implications about the housing stock of the City and the surrounding region. The report itself does not make any policy recommendations, but it offers a stark reminder of how important rental housing policy is to any effort to maintain socio-economic diversity in the City.

 

Thursday’s Advocacy & Think Tank Round-up

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  • A joint study by Enterprise Community Partners and the Harvard Joint Center for Housing Studies, Projecting Trends in Severely Cost Burdened Renters: 2015 – 2025 predicted that, in the coming decade, little would change with respect to 1 in 4 renters being severely rent burdened. The researchers examined a number of factors, including: a predicted 10% population increase, declining homeownership rates, and a predicted rise in demand for rental housing.  They also looked at a number of possible scenarios to determine how salary gain and population growth would affect the percentage of severely rent burdened households.  Even the most optimistic of scenarios would only result in a 1.4% decrease.
  • According to analysis by the National Association of Realtors (NAR) Existing Home sales fell by 4.8% from July to August despite slowing price growth and a slightly lower interest rate.  On the other hand NAR points out that Existing Home sales are 11% higher than August of last year.
  • The Turner Center for Housing innovation at U.C. Berkley has released analysis entitled Housing Highlights from the 2014 American Community Survey (ACS) which culls the housing related data from the ACS which is released by the Census Bureau and provides statistical trend charts relating to homeownership, cost and vacancy rates.  The Turner Center’s analysis finds, among other things  homeownership continuing to slide it is now at 63.1% following its peak in 2006 when it was at 67.3%. But it also finds that the overall housing cost burden is at its lowest point following the bubble.
  • According to a recent study by Zillow student debt only reduces chances of homeownership for non-graduates.

Homeowners Heading to Pottersville?

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Lionel_Barrymore_as_Mr._Potter

Mr. Potter from It’s A Wonderful Life

The Urban Institute has issued a report, Headship and Homeownership: What Does The Future Hold? The report opens,

Homeownership rates averaged around 64 percent until about 1990, when they began to climb dramatically, reaching 67.3 percent in 2006. The housing crisis that began in 2007 and the ensuing recession, from which the US economy is recovering slowly, resulted in a fall in the homeownership rate to 63.6 percent, according to the latest ACS numbers. Such a trajectory has generated important questions about the future of homeownership at all ages. The issues with young adults seem particularly acute. Will young adults want to own houses? Even if they do, will they be able to afford homeownership? The answers to these questions are still unclear, especially because millennials are not just slower to start their own households and purchase homes: they also are more likely to live in their parents’ homes than any generation in recent history. The rapidly changing racial and ethnic composition of the population also has profound implications for household formation and homeownership.

In this report, we dive deeply into the pace of household formation and homeownership attainment—nationally and by age groups and race/ethnicity over the past quarter-century—and project future trends. Considering the great uncertainty about household formation and homeownership, single-point forecasts of homeownership rates and housing demand could seriously mislead policymakers and obscure the potential implications of their decisions. Instead, we offer plausible competing scenarios for household formation and homeownership that generate a range of future national housing demand projections. (1)

I am not in a position to evaluate how well the report projects future trends, but some of its conclusions are worth considering together:

  • the homeownership rate will decline from 65.1 percent in 2010 to 61.3 percent in 2030; (46)
  • the rapid growth of the renter population will create significant demand for new rental housing construction and encourage shifting of owner-occupied dwellings to rentals; (47)
  • very tight credit availability standards will retard homeownership attainment and may exacerbate the growing shortage in rental housing; (48) and
  • the erosion of black homeownership needs to be addressed by more than mortgage policy. (48)

Taken together, these conclusions all point to a backsliding in the housing market: the American Dream disappearing for millions of Americans, particularly African Americans, who will end up living in overcrowded Pottersvilles straight out of It’s A Wonderful Life. Just like George Bailey, we have choices to make before that nightmare becomes a reality. But before we decide anything too hastily, we should consider the fundamental goals of housing policy.

I have argued that a “fundamental goal of housing policy is to assist Americans to live in a safe, well-maintained and affordable housing unit.” I am less convinced than most housing scholars that homeownership, given the state of today’s economy, is such a sure road to stable housing and financial well-being. So, instead of blindly focusing on increasing the homeownership rate, I would focus on increasing opportunities for sustainable homeownership. I believe the report’s authors would agree with this, but I think that housing scholars in general need to focus on policies that keep households in their housing, given how much income instability they now face.

Reiss on Fair Housing Falsehood

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The Providence (R.I.) Journal quoted me in its Truth-O-Meter column:  Mike Stenhouse: According to HUD, It’s Unfair, Unjust for Wealthy to Live in Exclusive Neighborhoods. The column reads, in part,

For more than three years, the Rhode Island Division of Planning has been working on RhodeMap RI, a long-term economic development plan meant to help guide efforts to improve the state’s economy.

The process, partly financed by a $1.9-million grant from the U.S. Department of Housing and Urban Development (HUD),  didn’t get much notice until a nearly 200-page draft of the plan was released in mid-September, igniting a firestorm of controversy.

Critics of the plan denounced it as a thinly disguised blueprint for social engineering. If it is implemented, they say, local communities will be forced to cede authority to the federal government on issues such as affordable housing and land use, and individual property rights will be under threat.

Supporters, including Governor Chafee and the planners and community leaders who drafted the plan, say it’s a well crafted, comprehensive guide that will help move the state’s economy forward over the decades ahead. They say there’s nothing in the plan that would infringe on individual property rights or local home rule.

The debate grew so heated at one meeting a shouting match broke out, with charges of racism and bigotry hurled. And last week, at a meeting of the Statewide Planning Council, opponents called it unconstitutional, socialist and even treasonous. Nonetheless, the council voted unanimously to adopt it.

Mike Stenhouse, CEO of the Rhode Island Center for Freedom and Prosperity, a conservative research group, has led the opposition. A few weeks ago, he talked about the plan on WPRO-AM’s “The Dan Yorke Show.”

Yorke asked Stenhouse to cite a component of the plan “that highlights what you think is problematic.”

“I’m going to give you my interpretation,” Stenhouse responded. “I don’t have their plan in front of me. What we believe, for instance, take Poppasquash Point in Bristol. According to HUD, it is patently unfair and socially unjust that wealthy people can live in an exclusive neighborhood.”

We wondered whether Stenhouse was right about HUD’s view of wealthy neighborhoods such as Poppasquash Point, one of the state’s priciest enclaves.

When we asked Stenhouse about his statement, he told us he was not directly quoting HUD, but said that his statement was “an accurate interpretation of HUD’s openly stated intent.” He provided links to multiple documents to support his position.

While we don’t view Stenhouse’s statement as a direct quote of HUD policy, we do  believe that listeners who heard Stenhouse’s preface — “according to HUD” — would assume he was summarizing HUD’s policy.

Stenhouse’s backup is comprised primarily of links to a news story and an editorial in Investor’s Business Daily and links to various legal  documents and HUD regulations.

*    *    *

According to David Reiss, a professor of real estate and housing policy at Brooklyn Law School, “HUD does not interpret the FHA [Fair Housing Act] to mean that `wealthy people’ can’t `live in an exclusive neighborhood.’”

“An exclusive neighborhood is an expensive one – the FHA does not ban expensive neighborhoods.” Reiss continued in an email statement. “What it does do is ban exclusionary practices.  Exclusionary practices are those that exclude people based on certain of their characteristics such as their race, sex or religion.  To my knowledge, HUD has never taken the position that merely living in an exclusive – that is, expensive — neighborhood violates the FHA.”

We also asked HUD whether Stenhouse had accurately characterized its rules.

“There are simply no policies, practices, regulations or anything that can validate such hyper hyperbole,” Brian Sullivan, a public affairs officer with HUD, said in an email statement.

Our ruling

Mike Stenhouse said “According to HUD, it is patently unfair and socially unjust that wealthy people can live in an exclusive neighborhood.”

There’s no doubt that HUD has challenged what it considers to be discriminatory practices at the community level, including exclusionary zoning ordinances.

But that’s not nearly the same as objecting to the right of wealthy people to live in expensive neighborhoods.

We rule Stenhouse’s claim False.

The Divided City — New York Edition

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Richard Florida and colleagues at the Martin Prosperity Institute have posted a report, The Divided City:  And the Shape of the New Metropolis. The executive summary explains that

To better understand the relationship between class and geography, this report charts the residential locations of the three major workforce classes: the knowledge-based creative class which makes up roughly a third of the U.S. workforce; the fast-growing service class of lower-skill, lower-wage occupations in food preparation, retail sales, personal services, and clerical and administrative work that makes up slightly more than 45 percent of the workforce; and the once-dominant but now dwindling blue-collar working class of factory, construction, and transportation workers who make up roughly 20 percent of the workforce.

 The study tracks their residential locations by Census tract, areas that are smaller than many neighborhoods, based on data from the 2010 American Community Survey. The study covers 12 of America’s largest metro areas and their center cities: New York, Los Angeles, Chicago, Washington, DC, Atlanta, Miami, Dallas, Houston, Philadelphia, Boston, San Francisco, and Detroit. It examines these patterns of class division in light of the classic models of urban form developed in the first half of the 20th century. These models suggest an outward-oriented model of urban growth and development with industry and commerce at the center of the city surrounded by lower-income working class housing, with more affluent groups located in less dense areas further out at the periphery. It also considers these patterns in light of more recent theories of a back-to-the-city movement and of a so-called “Great Inversion,” in which an increasingly advantaged core is surrounded by less advantaged suburbs.

 The study finds a clear and striking pattern of class division across each and every city and metro area with the affluent creative class occupying the most economically functional and desirable locations. Although the pattern is expressed differently, each city and metro area in our analysis has evident clusters of the creative class in and around the urban core. While this pattern is most pronounced in post-industrial metros like San Francisco, Boston, Washington, DC, and New York, a similar but less developed pattern can be discerned in every metro area we covered, including older industrial metros like Detroit, sprawling Sunbelt metros like Atlanta, Houston, and Dallas, and service-driven economies like Miami. In some metros, these class-based clusters embrace large spans of territory. In others, the pattern is more fractured, fragmented, or tessellated.

 The locations of the other two classes are structured and shaped by the locational prerogatives of the creative class. The service class either surrounds the creative class, being concentrated in areas of urban disadvantage, or pushed far off into the suburban fringe. There are strikingly few working class concentrations left in America’s major cities and metros. (iv)

As a New Yorker, I was particularly struck by the map of New York City on page 12. It is striking to see how few blue-collar communities are left in the City and how starkly divided the rest of the City is between the “creative” and “service” classes. This is not particularly surprising, but striking nonetheless.