There is not enough affordable rental housing
This piece originally appeared in the Orange County Register.
During the Great Depression, Congress committed the first national resources to public housing. That decision altered the course of millions of lives for the better – providing the most vulnerable Americans with a home that was otherwise out of reach and giving children the promise of a better future.
Today, the long bipartisan legacy of affordable rental housing is in doubt. Millions of Americans, including thousands in Orange County, are unable to find affordable places to rent even when they qualify for assistance.
How did we get here? After passage of the Wagner-Stegall Housing Act of 1937, the production of public housing accelerated in response to the growing need. Today, there are over 1.1 million units nationally, nearly one in five of them in rural areas. No physical units were built in Orange County.
Over time, the federal commitment to affordable rental housing grew to also include vouchers that low-income renters can use in the private market, subsidies for private owners that rent to low- and moderate-income households, and financing that helps create and preserve affordable rental units. Orange County has over 25,800 rental homes supported through these programs.
Federal rental assistance now enables 5 million low-income households -- encompassing more than 10 million people, including 4 million children -- to afford modest homes. A third are families with children, another third are seniors, and the remaining third are disabled, childless adults, disabled adults with children, and seniors with children.
While 10 million sounds like a lot, it represents just a quarter of the renters eligible for assistance. There is simply not enough federal, state, or local government funding to support all the need.
Housing is expensive, especially for low-income people. In Orange County, households need to earn $31.17 an hour — three times California’s new minimum wage — to afford a typical two-bedroom apartment in the county, according to the National Low Income Housing Coalition. Low-income families often have to spend more than a third of their income on rent, leaving them less money for other things needed to live healthy and productive lives, like nutritious food, transportation to get to work, health care, and books and supplies for school.
Another way to think about the affordable housing squeeze is the gap between what people can afford and what is available to rent. This gap in Orange County is nearly 120,000 units, which means that for every 100 very low-income households looking for a place to rent, only 41 homes are affordable and available. For households earning below $20,000 a year, only 18 rental homes are affordable and available.
To solve this problem we can raise people’s incomes through federal tax incentives like the earned income tax credit, increase the minimum wage, help workers attain the skills for higher-paying jobs, or remove regulatory barriers to lower the costs of producing housing in the private market. These are all good strategies, but as long as rents continue to rise, the incomes of low-wage people in the service economy will never catch up. We need equivalent strategies to lower the costs of renting.
With the housing budget under increasing pressure, federal efforts are focused on preserving existing public housing, not creating more. Meanwhile, tax credits for developers help produce 100,000 affordable rental units a year across the country, but without additional subsidy they are not affordable for the lowest income families. The largest source of federal assistance for these families are rental vouchers. But as rents rise, the cost of serving existing voucher recipients has grown, leaving limited resources for additional low-income households to benefit from the program.
Once the crisis besetting the conventional housing market wanes, we need a renewed and balanced national housing policy that assists both renters and owners. The federal resources subsidizing homeownership far exceed those dedicated to subsidizing rental housing for America’s lowest income citizens. All the subsidies for homeownership – the mortgage interest deduction, the deduction for property taxes, and the housing value that is not taxable – add up to about $300 billion annually. Compare this to the $37.4 billion the US Department of Housing and Urban Development spends on rental housing assistance. Throw in the tax subsidies for developers of affordable housing, which is about $8 billion a year, and there is still room for improvement.
As lawmakers in Washington get back to making policy, a balanced approach to housing finance reform should be at the top of many agendas. This would mean ensuring affordable mortgages for homeownership, as well as federal financing for affordable rental housing.
Even with more capital for affordable rental housing production and preservation, we still need a commitment to rental assistance to help the lowest income Americans secure decent, safe places to live. In a country as rich as ours, both can be done.
The Assisted Housing Initiative is a project of the Urban Institute, made possible by support from Housing Authority Insurance, Inc. (HAI, Inc.), to provide fact-based analysis about public and assisted housing. The Urban Institute is a non-profit, nonpartisan research organization and retains independent and exclusive control over substance and quality of any Assisted Housing Initiative products. The views expressed in this and other Assisted Housing Initiative commentaries are those of the authors and should not be attributed to the Urban Institute or HAI, Inc..
Rental housing in Washington, D.C.