August 5, 2019

Yes, There Is a National Housing Crisis – and Federal Policy Can Help

Numerous news articles, research papers and blog posts have recently described the current state of affordability in the rental housing market as a ‘crisis’. Whether comparing changes in rents and incomes, measuring shares of cost-burdened renters, or estimating gaps between supply and demand for affordable rental units, these assessments have all led to the inescapable conclusion that it has become more difficult for renters – especially those with low incomes – to find and afford decent housing in neighborhoods of opportunity.

Despite this overwhelming body of evidence, there are still some skeptics who feel concerns about housing affordability are overblown and question the existence of a nationwide problem. Using spurious data and cherry-picked examples, these critics suggest such problems are isolated to a handful of places and/or people, rather than constituting a nationwide issue.

To counter these claims, we offer a set of facts about housing markets that have been conveniently obfuscated or overlooked by a recent entry into the housing crisis denier series. With appropriate data comparisons and finer-grained looks at conditions in housing markets, we show that indeed there are reasons for concern about rental affordability on a national basis, so much so that the federal government needs to take a more direct approach to addressing this issue.

Fact #1: Rents are rising faster than renter incomes

To argue that rental housing has become unaffordable requires looking at the two factors that determine this condition: incomes and housing costs. However, it is important to use an apples-to-apples comparison between the two. For example, changes in rents over time should only be assessed relative to the incomes of those who pay rents, i.e. renters, and not to the larger set of all households. Done this way, it is clear the latter has well outpaced the former in recent years.

For perspective, that 10.7 percent increase in real rents since 2001 equates to about $95 more spent per month, or an additional 3 percent of the median renter income in 2017. 

Fact #2: Rental cost burdens are high and growing, especially among middle-income renters

While comparing median rents to median renter incomes offers one way to assess dynamics in rental markets, few renter households experience this hypothetical scenario. A better test of whether there is a rental affordability problem is to consider what renters actually pay for their housing relative to their income. 

According to Census data, the median ratio of rents to renter incomes (again, making the apples-to-apples comparison) in 2017 was 29 percent, or just below the 30 percent threshold for affordability used in setting federal housing subsidies. As such, just under half (47 percent) of all renter households exceeded this standard, leaving them cost burdened. That means around 20 million U.S. households are devoting large shares of their income on housing, leaving fewer dollars to spend on other necessities like child care, food, and health care

Further contrary to the claims of some housing crisis deniers, these affordability concerns have gotten worse over time. While the share of cost-burdened renters has declined slightly since the end of the recession ten years ago, it is ten percentage points higher than it was in 2000, and more than double the share in 1960.

Source: Tabulations of Decennial Census and American Community Survey data by the Joint Center for Housing Studies. Household income quintiles are equal fifths of all households sorted by pre-tax household income.

The above chart also shows that renters and rental units are not evenly distributed by income and cost, as over 80 percent of renters in the bottom income quintile (i.e. the lowest 20 percent of all households sorted by income) recently struggled to pay for their housing. Renters in the second and third quintiles, meanwhile, have experienced the largest growth in their cost burden shares over time, suggesting that rental affordability is increasingly an issue for many middle-income households.

Fact #3: Supply of affordable rental units is not keeping pace with demand

High housing cost burdens may be less of a concern if renters are choosing to spend more of their income on their housing, despite cheaper options available. However, data on the supply of rentals suggests this is not the case, as the number of units affordable to low-income renters is scarce and shrinking. As a recent analysis by Enterprise found, in every state there are more renters with incomes below 30 percent of their state median than there are rental units affordable to them. In states with more expensive housing, such as California, Florida, Hawaii, and New York, this deficit extends all the way renter households with incomes up to 80 percent of state median.

The supply gap in rental markets comes as the number of low-cost units have declined in recent years. According to the Joint Center for Housing Studies, the number of units renting for less than $800 dropped by 1 million in 2017 alone, and by 4 million since 2011 (based on real dollar values, so the decline is not attributable to inflation). Nor is it just rising rents that contribute to the affordability deficit; an analysis by the Hudson Institute found that 4.1 million rental units deemed affordable to very-low income renters (i.e. with incomes below 50% of area median income) were permanently lost to demolition or conversion between 1985 and 2013. Replacing these units with new construction, meanwhile, is almost impossible, except with deep subsidies or incentives.

Fact #4: Housing affordability concerns are not exclusive to a few high-cost metro areas

Much of the media attention on rental affordability focuses on the usual suspects, e.g. big cities where housing costs have risen beyond the means of even moderate-income households. This might give the impression that the challenge of unaffordable rental housing is limited to high-cost coastal metros, while the rest of the nation manages to get along just fine. Yet a recent analyses by the Brookings Institute found that even in ‘heartland’ metro areas, cost burdens among low-income households (most of whom rent) are still high. 

Odd as it may seem, markets with low housing costs are also struggling with housing affordability, though perhaps one with a different set of challenges. Where jobs are declining and incomes are low, even so-called affordable housing can still be a burden. For such places, fixes to the local economy may be more pressing than solving housing affordability. Indeed, an influx of higher cost housing could even be a welcome sign in some depressed cities, if it follows increased demand for living in these places among higher-income households. 

The bottom line:

These facts make clear that renters across the country are increasingly struggling to find affordable housing where they live. In addition to the millions spending more than 30 percent of their income on housing, even more renters are living affordably but sacrificing the quality, size, and/or location of their housing to do so. 

The lack of affordable options – in well-designed homes and quality neighborhoods close to jobs and opportunity – is already at a breaking point for many renter households. While recent efforts at the state and municipal level to ease zoning restrictions and cap rent increases are commendable, they only address a small segment of the rental market. 

Enterprise Community Partners supports recent federal legislative efforts to mitigate rental affordability challenges nationwide, such as the Affordable Housing Credit Improvement Act, which would expand the Housing Credit authority by 50 percent to help create more affordable rentals and the Save the Affordable housing Act of 2019, which would protect thousands of Housing Credit properties from prematurely converting to market rate units. Enterprise also urges lawmakers to provide robust funding for housing and community development programs

For more information on Enterprise’s federal housing policy priorities, please visit our federal policy website. For updates on federal legislation to address rental affordability, subscribe to our daily newsletter.

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