Today more households are renting, but a record number face steep prices that may force them to make tough decisions on basic needs like food, transportation, and health care. The Center for American Progress released a report on Wednesday that analyzes this rental affordability squeeze. The report, which outlines a set of potential solutions, shows how policymakers can act to preserve affordable units that already exist so that more families can experience the benefits associated with affordable housing.
According to new analysis by the Harvard Joint Center for Housing Studies, the share of U.S. households that rent climbed to 37 percent, the largest share of the population since the mid-1960s. Forty-three million households lived in rental housing in mid-2015, a substantial 9 million increase from 2005. But while the number of low-income renting households grew by 40 percent from 2003 to 2013, the number of low-cost rental units only grew by 10 percent.
As the demand for rental housing grows, more and more renters are forced to devote sizeable chunks of their paychecks to secure their housing. The number of renters who pay more than 30 percent of their income for housing—a common metric for affordability—rose to 21.3 million in 2014. A record 11.4 million renters were “severely cost-burdened,” meaning they paid more than half of their income for housing. The affordability squeeze is most prevalent among the lowest-income, and minorities and households with dependent children and/or a single income are more likely to be severely cost-burdened.
This all means that more families can’t find the affordable housing they need. Meanwhile, the U.S. continues to lose significant numbers of already-affordable units to market trends, expiring affordability restrictions, and disrepair. Over 2 million privately owned and federally subsidized units are at risk of losing their affordability status over the next 10 years.
While the overwhelming majority of contracts with federal project-based assistance will likely be renewed, expiring affordability periods deserve the attention of policymakers. The units most likely to phase out of the affordable housing stock are those located in lower-poverty, rapidly appreciating markets where owners stand to profit significantly by selling or converting their buildings to market rate apartments. Half of the affordable housing stock with expiring project-based subsidies is in such neighborhoods, precisely where affordable rental housing is most urgently needed.
Preserving the affordable units that already exist is an imperative step to addressing the major supply problem for affordable rental properties in the United States. And it’s a common-sense step because it’s cheaper to preserve an existing affordable unit than to build a new one – by about 25 to 45 percent. In its new report, the Center for American Progress identifies ways that policymakers can act today in order to preserve the affordable rental housing units that already exist across the country.
One important step in this direction is finalizing the “duty-to-serve” rule, which the Federal Housing Finance Agency, or FHFA, re-proposed on Tuesday. The rule, established by the Housing and Economic Recovery Act of 2008, calls on mortgage insurance giants Fannie Mae and Freddie Mac to serve three underserved areas, one of them being affordable housing preservation. By finalizing the rule after receiving public input, FHFA can help ensure that Fannie and Freddie facilitate a secondary mortgage market that preserves affordable units.
Regulatory policy, though, is not enough to preserve affordable housing sufficiently. Congress must fund critical programs that have repeatedly faced the chopping block. HUD’s HOME Investments Partnerships Program, or HOME, provides formula grants to states and localities to build, buy, or repair affordable rental or homeownership units for low-income people. Each state is eligible for HOME funding, but the program has been cut by more than 50 percent since FY 2010. The National Housing Trust Fund, another critical source that helps both preserve and build affordable housing for extremely low-income people, has faced repeated attempts by Congressional Republicans to divert or obstruct its funding. Allowing programs like HOME and the Housing Trust Fund to receive the funding they need is a simple step toward preserving affordable housing stock.
Policymakers could also pass new laws and regulations that amplify preservation efforts. The Low Income Housing Tax Credit program, or LIHTC, for example, provides tax credits for acquiring, rehabilitating, or building affordable rental housing for low-income households. The Bipartisan Policy Center’s Housing Commission estimates that a strategic expansion of LIHTC by 50 percent would preserve or create 350,000 to 400,000 affordable units over ten years.
The Center for American Progress examines these and additional policy proposals in greater detail in its report. The proposals would address the tight rental market, improve the availability of affordable housing in high opportunity areas, and revitalize distressed neighborhoods so that more families can benefit from affordable housing. Given the sky-rocketing demand for rental housing and the affordability squeeze families are experiencing, lawmakers must consider such strategies for preserving existing affordable units.
Shiv Rawal is a Research Assistant for Housing Policy at the Center for American Progress. Sarah Edelman is the Director for Housing Policy at the Center for American Progress.