Tag Archives: area median income

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.

The Long Wait for Home

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house-keys

The most recent issue of Housing Spotlight from the National Low Income Housing Coalition is titled The Long Wait for a Home. The Executive Summary reads,

The Public Housing and Housing Choice Voucher (HCV) programs provide essential affordable housing to some of the nation’s most financially vulnerable households. Forty percent of new public housing admissions and 75% of new voucher holders each year are required to be extremely low income (ELI) households, who earn no more than 30% of their area’s median income (AMI) or the federal poverty guideline, whichever is higher. Seventy-one percent of the nearly 1.1 million public housing households and 74% of the 2.2 million HCV recipient households are ELI (HUD, 2015).

The housing resources available to ELI renters however are insufficient. The private and subsidized rental markets make available only 3.2 million affordable homes for the nation’s 10.4 million ELI renter households, resulting in a national shortage of 7.2 million rental homes (NLIHC, 2016). ELI households face a long wait for housing assistance. Unable to find affordable housing, 75% of ELI renter households are severely cost burdened, spending more than 50% of their income on housing costs and leaving little money for other necessities (NLIHC, 2016).

The last nationwide survey of Public Housing Agencies (PHAs) regarding their public housing and voucher waiting lists was conducted in 2012. Since then, rental affordability has worsened, squeezing ELI renters even further out of the private market. To document the current state of waiting lists, NLIHC surveyed PHAs in the Fall of 2015 and Winter of 2016. Three hundred twenty PHAs responded with complete surveys, representing a diversity of size, location, and metropolitan status.

Survey data paint a bleak picture of waiting lists closed to new applicants and long waits for housing assistance. Key findings include: „

  • Fifty-three percent of HCV waiting lists were closed to new applicants for housing assistance. Sixty-five percent of HCV waiting lists closed to the general public had been closed for at least one year. „
  • Eleven percent of public housing waiting lists were closed to new applicants. Thirty-seven percent of public housing waiting lists closed to the general public had been closed for at least one year. „
  • The median HCV waiting list had a wait time of 1.5 years. Twenty-five percent of HCV waiting lists had a wait time of 3 years or longer. „
  • The median public housing waiting list had a wait time of 9 months. Twenty-five percent of public housing waiting lists had a wait time of 1.5 years or longer. „
  • ELI households accounted for nearly 74% of households on the average HCV waiting list and more than 67% of households on the typical public housing waiting list.
  • Families with children accounted for 60% of households on the average HCV waiting list and 46% of households on the typical public housing waiting list. „
  • Seniors comprised the most common type of household on 15% of the public housing waiting lists for which these data were provided.

Closed waiting lists and long waits for housing assistance make clear that we must expand housing resources for our nation’s lowest income renters. Legislation introduced in the 114th Congress would increase investments in vouchers, public housing, and other housing programs.

*     *      *

These policy changes, and others like them, could end housing poverty and homelessness once and for all by providing the resources necessary for every low income family to afford a home.

This report rightly brings attention to the big problems facing extremely low income households and federal affordable housing programs. Whether anything is done for them depends completely on the outcome of the election.

New Housing and Displacement

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Lsanburn

The Institute of Governmental Studies at UC Berkeley has issued a research brief, Housing Production, Filtering and Displacement: Untangling the Relationships. It opens,

Debate over the relative importance of subsidized and market-rate housing production in alleviating the current housing crisis continues to preoccupy policymakers, developers, and advocates. This research brief adds to the discussion by providing a nuanced analysis of the relationship between housing production, affordability, and displacement in the San Francisco Bay Area, finding that:

• At the regional level, both market-rate and subsidized housing reduce displacement pressures, but subsidized housing has over double the impact of market-rate units.

• Market-rate production is associated with higher housing cost burden for low-income households, but lower median rents in subsequent decades.

• At the local, block group level in San Francisco, neither market-rate nor subsidized housing production has the protective power they do at the regional scale, likely due to the extreme mismatch between demand and supply.

Although more detailed analysis is needed to clarify the complex relationship between development, affordability, and displacement at the local scale, this research implies the importance of not only increasing production of subsidized and market-rate housing in California’s coastal communities, but also investing in the preservation of housing affordability and stabilizing vulnerable communities. (1)

This brief takes on an important subject — the relationship between new housing and displacement — and concludes,

There is no denying the desperate need for housing in California’s coastal communities and similar housing markets around the U.S. Yet, while places like the Bay Area are suffering from ballooning housing prices that are affecting people at all income levels, the development of market-rate housing may not be the most effective tool to prevent the displacement of low-income residents from their neighborhoods, nor to increase affordability at the neighborhood scale.

Through our analysis, we found that both market-rate and subsidized housing development can reduce displacement pressures, but subsidized housing is twice as effective as market-rate development at the regional level. It is unclear, however, if subsidized housing production can have a protective effect on the neighborhood even for those not fortunate enough to live in the subsidized units themselves.

By looking at data from the region and drilling down to local case studies, we also see that the housing market dynamics and their impact on displacement operate differently at these different scales. Further research and more detailed data would be needed to better understand the mechanisms via which housing production affects neighborhood affordability and displacement pressures. We know that other neighborhood amenities such as parks, schools, and transit have a significant impact on housing demand and neighborhood change and it will take additional research to better untangle the various processes at the local level.

In overheated markets like San Francisco, addressing the displacement crisis will require aggressive preservation strategies in addition to the development of subsidized and market-rate housing, as building alone won’t protect specific vulnerable neighborhoods and households. This does not mean that we should not continue and even accelerate building. However, to help stabilize existing communities we need to look beyond housing development alone to strategies that protect tenants and help them stay in their homes. (10-11, footnote omitted)

The brief struggles with a paradox of housing — how come rents keep going up in neighborhoods with lots of new construction? The answer appears to be that the broad regional demand for housing in a market like the Bay Area or New York City overwhelms the local increase in housing supply. The new housing, then, just acts like a signal of gentrification in the neighborhoods in which it is located.

If I were to criticize this brief, I would say that it muddies the waters a bit as to what we need in hot markets like SF and NYC: first and foremost, far more housing units. In the absence of a major increase in supply, there will be intense market pressure to increase rents or convert units to condominiums. Local governments will have a really hard time overcoming that pressure and may just watch as area median income rises along with rents. New housing may not resolve the problem of large-scale displacement, but it will be hard to address displacement without it. Preservation policies should be pursued as well, but the only long-term solution is a lot more housing.

I would also say that the brief elides over the cost of building subsidized housing when it argues that subsidized housing has twice the impact of market-rate units on displacement. The question remains — at what cost? Subsidized housing is extremely expensive, often costing six figures per unit for new housing construction. The brief does not tackle the question of how many government dollars are needed to stop the displacement of one low-income household.

My bottom line: this brief begins to untangle the relationship between housing production and displacement, but there is more work to be done on this topic.

Affordable Enough for NYC?

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Real Affordability for All has released a report, Real Affordable Communities: Mayor Bill De Blasio and the Future of New York City. The report opens,

Across the five boroughs, the affordability crisis is growing every day. Today, low- and moderate-income New Yorkers continue to be priced out of their neighborhoods. The incomes of countless New Yorkers are not increasing while rents keep rising. The growing gap between lower incomes and higher rents is making New York City increasingly unaffordable.

Indeed, a recent study released by StreetEasy, The High Burden of Low Wages: How Renting Affordably in NYC is Impossible on Minimum Wage, found that a New Yorker earning $15 an hour could afford just one neighborhood: Throgs Neck in the Bronx.

“The extent to which rent growth has outpaced income growth in New York City means low-wage workers face three options: find several roommates to lower their personal rent burden, take on more than one job, or move out of New York City,” the study finds.

According to a close analysis of the most recent Census data, Bloomberg’s housing efforts generated a shortage of more than 400,000 affordable units for low-income New Yorkers. Low-income here is defined as a household earning less than 50% of Area Median Income (AMI). For a household of four, that means an approximate annual income of less than $42,000. (In 2012 New York City area median income was $83,600 for a family of four; the 2015 New York City area median income for a family of four is $86,300).

Overall, utilizing the 2012 census data, more than 700,000 low-income New Yorkers were left behind by Bloomberg’s housing plan. To tackle the affordability crisis, Mayor de Blasio has proposed preserving or creating 200,000 units of affordable housing. He wants to achieve that goal through mandatory inclusionary zoning and dense new residential development in various neighborhoods.

To succeed, de Blasio will need to avoid repeating the mistakes of Bloomberg’s housing agenda, and ensure that real affordable housing is created for the huge number of low-income New Yorkers who were not served by the previous administration and still struggle to survive. (1-2)

The Real Affordability for All advocates that “Low-income neighborhoods like East New York and the South Bronx will be empowered to offer a ‘density bonus’ to developers in exchange for real affordable housing below 50 % of AMI and for career-oriented union construction jobs for local residents at new development sites.” (7)

The report provides an example pro forma for one building to demonstrate that this plan is do-able. The report does not, however, indicate where the De Blasio Administration would find the $15 million in additional subsidies it would take for this one building to be built according to the Real Affordability for All guidelines.

At this point, the plan is more of a wish list than a serious proposal, but it does make clear that there is a deep need for deep housing subsidies among low- and moderate-income households.

Affordable Housing for which Low-Income Households?

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The National Low Income Housing Coalition’s latest issue of Housing Spotlight provides its annual examination of “the availability of rental housing affordable to” extremely low income “and low income renter households . . ..” (1) It finds that

the gap between the number of ELI households and the number of rental homes that are both affordable and available to them has grown dramatically since the foreclosure crisis and recession. Despite this growing need, most new rental units being built are only affordable to households with incomes above 50% of AMI. At the same time, the existing stock of federally subsidized housing is shrinking through demolition and contract expirations, and waiting lists for housing assistance remain years long in many communities. Federal housing assistance is so limited that just one out of every four eligible households receives it. (1, emphasis in the original)
The article, “Affordable Housing is Nowhere to be Found for Millions,” describes the role of the National Housing Trust Fund, signed into law by the Housing and Economic Recovery Act of 2008, but only recently funded by Fannie Mae and Freddie Mac:
The NHTF is structured as a block grant to states, and at least 90% of all funding will be used to produce, preserve, rehabilitate and operate rental housing. Further, 75% of rental housing funding must benefit ELI. The funding of the NHTF will make a difference in the lives of many ELI renters by supporting the development and preservation of housing affordable to this income group. However, additional funding to the NHTF will be necessary to assure support to all income eligible households in need of housing. (1, footnote omitted)
The NLIHC’s key findings from this work include,
  • The number of ELI renter households rose from 9.6 million in 2009 to 10.3 million in 2013 and they made up 24% of all renter households in 2013.
  • There was a shortage of 7.1 million affordable rental units available to ELI renter households in 2013. Another way to express this gap is that there were just 31 affordable and available units per 100 ELI renter households. The data show no change from the analysis a year ago.
  • For the 4.1 million renter households DLI renter households in 2013, there was a shortage of 3.4 million affordable rental units available to them. There were just 17 affordable and available units per 100 DLI renter households.
  • Seventy-five percent of ELI renter households spent more than half of their income on rent and utilities; 90% of DLI renter households spent more than half of their income for rent and utilities.
  • In every state, at least 60% of ELI renters paid more than half of their income on rent and utilities. (1)

Given that housing affordability remained a problem during both boom times and bust and given that we should not expect another dramatic expansion of federal subsidies for rental housing, now might be a good time to ask what we can reasonably expect from the Housing Trust Fund. Should it be spread wide and thin, helping many a bit, or narrow and deep, helping a few a lot? No right answers here.

Housing Subsidies For Those Who Need Them

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The National Low Income Housing Coalition has posted Aligning Federal Low Income Housing Programs with Housing Need. The Executive Summary goes right to the heart of the matter:

The number of renters in the United States has steadily increased since 2006 and will continue to rise as new households form in the post-recession economy. In 2012, one out of four renter households had incomes at or below 30% of the area median income (AMI) for a total of 10.3 million households categorized as extremely low income (ELI). In the same year there were just 3.2 million units affordable and available to ELI households, creating a shortage of 7.1 million rental units affordable to these households.

Despite this evidence of a substantial need for deeply affordable rental housing, the low income housing resources that are provided by the federal government are only able to reach 23% of the eligible population. (iii)
This study looks at the extent to which the Low Income Housing Tax Credit (LIHTC), the HOME program and the Federal Home Loan Banks’ Affordable Housing Program (AHP) serve ELI households. It finds that in general, “these three programs do not serve ELI households on their own. Their ability to serve ELI households depends on the addition of one or more forms of subsidy, usually housing choice vouchers (HCV).” (iii)
The study identifies common themes from its research on this topic:
  • Developers layer multiple funding sources while adapting to rapidly changing political and fiscal environments. Many also rely on non-traditional resources, such as private donations, to fill funding gaps.
  • Reducing or eliminating mortgage debt is critical to be able to serve ELI households.
  • Cultivating strong local partnerships is a key factor affecting developers’ ability to serve ELI households. Often, local jurisdictions that have prioritized affordable housing are willing to donate land or property at a low cost.
  • Cross-subsidization is an important strategy used by many developers committed to inclusive properties that serve ELI households. This strategy incorporates units affordable to ELI households into projects containing other units occupied by households with a broader mix of incomes. The rents paid by higher income households supplement the overall operating expenses of the project, compensating for the lower rents that ELI households can afford.
  • While the case studies highlighted some very effective strategies for serving ELI households without the use of vouchers, there is not one model that can be easily replicated. (iii-iv)

None of this is particularly earth shattering, but it is useful to to look into this topic in a systematic way. The Coalition hopes that this report “will contribute to the broader conversation about simplifying the process of financing affordable housing developments, refining existing programs so that they incentivize developers to serve ELI households, and finding ways to fund the ongoing operating costs of units that do serve ELI renters.” (iv)

As an off-the-cuff response, I wonder if the nation’s affordable housing agenda is benefited from such a complex funding environment for housing for extremely low income households. Can it just be funded more comprehensively, acknowledging the reality that it requires deep subsidies from the get-go? What is the opportunity cost of requiring developers to devote so much time to creating such complicated deal structures? In the current political environment, I doubt that affordable housing advocates have the stomach to raise these questions, lest Congress decides to cut back affordable housing subsidies even further. But in the long term, these are questions worth asking.