JCHS’ State of the Nation’s Housing 2019 Report Shows that Renters Remain Widely Cost Burdened Even as Burden Rates Declined Slightly
Today the Joint Center for Housing Studies (JCHS) at Harvard University released the State of the Nation’s Housing 2019, its annual assessment of the housing market, demographic trends and the housing challenges faced by U.S. households. In this year’s report, JCHS finds that:
- Renters remain widely cost burdened even as burden rates declined slightly
- Cost burdened renters continue to face difficult tradeoffs between paying for housing and other necessities
- Conditions at the lower end of the rental market are expected to remain challenging
- Unsheltered homelessness is on the rise, particularly in high-cost Western states
- The rising threat of natural disasters continues to harm the housing market and its affordability
- Despite upturns in homeownership rates among households of color, racial gaps persist in the housing market
- Federal spending on housing and community development programs continues to fall short of demand
Renters remain widely cost burdened even as burden rates declined slightly
According to the report, 2017 measures showed small signs of improvement for cost burdened renters. In 2017, 20.5 million renter households were cost burdened (compared to 20.8 in 2016), including nearly 10.7 million renter households who were severely cost burdened (compared to 11 million in 2016). Cost burdened is defined as households spending more than 30 percent of income on housing, with severely cost burdened defined as spending more than half of its income on housing. Cost burdened renter households outnumbered the 17.3 million homeowners who faced cost burdens in 2018. Last year, the share of cost burdened renter households dropped slightly to 47.4 percent, 3.4 percentage points below the 2011 high but up 6.8 percentage points from 2001.
The incidence of cost burden is especially prevalent among lower-income renter households. In 2017, nearly 83 percent of renter households earning less than $15,000 and more than half of renter households earning $30,000–$44,999 faced cost burdens. Furthermore, the share of cost burdened renter households was significantly higher among households of color. Nearly 55 percent of black renter households were cost burdened, followed by Hispanic households at 53.5 percent, and Asian households at 45.7 percent, compared to 42.6 percent for white households.
Cost burdened renters continue to face difficult tradeoffs between paying for housing and other necessities
The report explains that renter households facing significant cost burdens often prioritize monthly rent payments over other expenses, cutting spending on basic necessities, such as food, health care and transportation. In 2017, severely cost burdened households in the bottom expenditure quartile (group that consists of 25 percent of households with lowest incomes who are severely cost burdened) spent less than $550 on non-housing expenditures. Compared to their counterparts without burdens, these households with severe cost burdens spent 13 percent less on food, 40 percent less on healthcare, and 23 percent less on transportation each month. Severely cost burdened households with children spent less than $700 on average for all non-housing costs per month.
Conditions at the lower end of the rental market are expected to remain challenging
The National Low Income Housing Coalition (NLIHC) has reported that extremely low-income (ELI) renters – those earning up to 30 percent of the area median income – continue to face significant challenges in finding affordable housing. In 2017, only 4 million rental units were affordable and available to the nation’s 11 million ELI renters. JCHS explains that this challenge put a strain on the subsidized housing stock. HUD’s 2018 Picture of Subsidized Households data show that there were 1.2 million occupied Section 8 project-based units (up by about 28,000 from 2010) and 2.2 million Housing Choice Vouchers (up by about 82,000 from 2010) in use last year. These figures highlight the rising demand for subsidized housing. JCHS also suggests that ongoing losses of affordable units have fueled this scarcity. Between 2011 and 2017, the stock of affordable units renting for less than $800 fell by 17 percent or four million units. The report projects that conditions at the lower end of the market will remain challenging as millions of low-income households compete for a tight inventory of affordable rental housing.
Unsheltered homelessness is on the rise, particularly in high-cost Western states
Between 2008 and 2018, the number of individuals experiencing homelessness dropped by 87,000, reflecting an expansion of permanent supportive housing across the country. However, HUD’s Annual Homeless Assessment report shows that nearly 552,830 individuals experienced homelessness on a given night in January 2018. While the number of people living in shelters dropped slightly to 358,363, the number of individuals experiencing unsheltered homelessness rose by 2.3 percent to 194,467 (35 percent of individuals experiencing homelessness). The report points out that the rise in the number of people experiencing unsheltered homelessness is significant in certain high-cost Western states. Between 2014 and 2018, these recorded figures increased by more than 100 percent in Colorado, 80 percent in Washington, 50 percent in Oregon, and 25 percent in California. This challenge has prompted state and local governments to generate new funds for affordable housing development. (See Enterprise’s recap of where some of the 2018 housing ballot measures landed). Examples include a voter-approved ballot measure that authorizes the State of California to use previously authorized bonds toward services for homeless populations with serious mental illness, as well as a voter-approved measure that imposes a tax on San Francisco’s larger employers to generate funds for homelessness prevention and services. While these measures have generated needed funds for creating permanent supportive and affordable housing, millions of renters in high-cost areas continue to face significant affordability challenges, requiring targeted and sustained public-private partnerships.
Rising threat of natural disasters continues to harm the housing market and its affordability
The rising frequency and intensity of natural disasters has created new challenges in the housing market. JCHS notes that natural disasters displace hundreds of thousands of households annually and inflict billions of dollars of damage on the housing stock. The National Oceanic and Atmospheric Administration counted 14 natural disasters last year exceeding $1 billion in damage each, with costs for the year amounting to nearly $92 billion. According to the CoreLogic 2018 Natural Hazard report, Hurricane Florence alone damaged some 700,000 residential and commercial properties in North Carolina, South Carolina and Virginia. Furthermore, California’s 2018 wildfires destroyed over 18,800 and 1,600 structures in the cities of Paradise and Malibu, respectively. The American Housing Survey shows that real homeowner expenditure on disaster-related improvements have doubled from $7 billion annually in the late 1990s to $14 billion so far in the 2010s.
Despite upturns in homeownership rates among households of color, racial gaps persist in the housing market
After falling for 12 consecutive years, the U.S. homeownership rate rose slightly to 64.4 percent last year. According to JCHS, the largest increase was among households aged 25-39, whose homeownership rate was up by 2 percentage points to 1.1 million between 2016 and 2018. While all races and ethnic groups witnessed upturns in their homeownership rates, the racial homeownership gap persisted. Asian/other households witnessed the largest increase of 2.6 percentage points between 2016 and 2018. Homeownership rates for white and Hispanic households rose 1.1 percentage points each, and black households’ homeownership rate only increased 0.7 percentage points. As a result, JCHS points out, over the past two years, the white-Hispanic homeownership gap has remained unchanged while the black-white homeownership gap has widened.
Enterprise’s Policy Development and Research team has been releasing an on-going quarterly report on housing tenure trends, which is based on quarterly data from the U.S. Census Bureau’s Housing Vacancy Survey (HVS). The latest update shows a reversal of the recent pattern of rising ownership and declining rentership. For the first time since the end of the housing downturn, the national homeownership rate declined by 0.3 percentage points to 64.3 percentage in Q1 2019, while the share of renting households increased to 35.7 percent. It also explains that the expanding black-white tenure gap reflects a continued decline in homeownership among black households, whose owning share fell to 41.1 percent in the first quarter of this year.
Federal spending on housing and community development programs continues to fall short of demand
The 2019 Consolidated Appropriations Act provided modest funding increases for housing and community development in Fiscal Year (FY) 2019. This spending package allocates approximately $44.20 billion to HUD, an increase of nearly four percent over FY 2018 enacted levels. Lawmakers increased funding for Housing Choice Vouchers by over $400 million over FY 2018 enacted levels to $22.60 billion, which is adequate to renew all existing tenant-based voucher contracts. They also set aside $25 million for a family mobility demonstration program that aims to help families move to and remain in lower-poverty neighborhoods. The Act provides $11.75 billion for Project-Based Rental Assistance, which is approximately $230 million above FY 2018 enacted levels. Public housing received modest increases, with $2.77 billion for the Public Housing Capital Fund and $4.65 billion for the Public Operating Fund. The Act also provides level funding for Community Development Block Grants at $3.3 billion and Section 4 Capacity Building at $35 million. However, after several years of level and increasing funding, lawmakers cut funding for the HOME Investment Partnerships Program by $110 million to $1.25 billion. (For a detailed breakdown of final FY 2019 funding levels for housing and community development programs, see Enterprise’s detailed budget chart.)
JCHS notes that some of these budget increases only help key programs keep up with inflation and are not sufficient to close gaps in much needed funding levels. Furthermore, while small cuts were made to some programs, lawmakers were able to provide strong funding for housing and community development in FY 2018 and 2019 because of the two-year budget deal that raised the spending caps on discretionary spending. To avoid dramatic cuts across federal programs in FY 2020, Congress will again need to raise the spending caps on discretionary spending programs. JCHS also points out that in addition to inadequate funding, a significant number of subsidized housing units are at risk of loss. According to JCHS' analysis of the National Housing Preservation database, there are 1.2 million subsidized rentals with affordability restrictions that could expire by 2029.
Opportunities to the nation’s growing housing affordability challenges
Given the findings from the State of the Nation’s 2019 report, we expand on JCHS’ recommendations and offer a number of actions that can be taken to prevent the nation’s housing affordability challenges from worsening:
- Expand federal spending on affordable housing preservation and creation
The report reinforces the need to expand and strengthen federal programs that preserve and expand the supply of affordable homes. Supported by continued advocacy efforts from the ACTION Campaign, which Enterprise co-chairs, lawmakers last year enacted the first expansion of the Low-Income Housing Tax Credit (Housing Credit) in ten years. The FY 2018 omnibus spending package includes a provision that expands the Housing Credit by 12.5 percent for four years. This measure also includes a new permanent provision on income averaging, which allows Housing Credit units to be affordable at up to 80 percent of area median income (AMI), offset by deeper targeting in other units to maintain average affordability in the project at 60 percent AMI.
The ACTION Campaign continues to advocate to strengthen and expand the Housing Credit, educating more lawmakers on this vital housing financing tool. Earlier this month a bipartisan group of lawmakers in the House and Senate introduced the Affordable Housing Credit Improvement Act (AHCIA) of 2019, which would expand Housing Credit authority by 50 percent and establish a minimum 4 percent Housing Credit rate. Together, these two provisions alone would provide for approximately 450,500 more affordable homes over the next ten years. In addition to the State and District Housing Credit factsheets, the ACTION Campaign has released new fact sheets that demonstrate the impact of multifamily housing bonds with Housing Credit. The fact sheets also include the projected number of additional affordable homes that would result from establishing a minimum 4 percent Housing Credit rate (See the ACTION Campaign’s Advocacy Toolkit for resources to advocate for the Affordable Housing Credit Improvement Act).
In addition, Enterprise will also continue to work with our partners to ensure that proven affordable housing and community development programs, such as the HOME Partnerships program and the Community Development Block Grants, receive the necessary funding to serve low-income households and communities. We will also continue to urge Congress to raise the spending caps on discretionary spending programs to avoid dramatic cuts across federal programs in FY 2020. Visit the Enterprise blog for information on FY 2020 appropriations).
- Improve disaster recovery and prioritize mitigation and resiliency efforts
JCHS notes that the rising frequency and intensity of natural disasters necessitate developing disaster response systems that can provide timely and effective relief to affected households. The report also emphasizes the need for national commitment to making housing more resilient against natural disasters. As part of a coalition, Enterprise urged Congress to authorize federal funds for supporting mitigation projects that can help communities become more resilient. Last year Congress passed the Disaster Recovery Reform Act, which for the first time authorizes disaster mitigation funds disseminated through HUD’s Community Development Block Grant Disaster Recovery (CDBG-DR) grants and an annual set aside of FEMA’s disaster relief funds for the Building Resilient Infrastructure and Communities program.
Last year, Enterprise’s Senior Vice President for Public Policy and Senior Advisor for Resilience Marion McFadden testified before the House Financial Services Oversight and Investigations Subcommittee on strengthening the CDBG-DR program. McFadden also testified earlier this year before the Subcommittee on the “The Administration of Disaster Recovery Funds in the Wake of Hurricanes Harvey, Irma, and Maria.” Both testimonies explained Enterprise’s priorities for the CDBG-DR program, including permanently authorizing the program, investing in building capacity, and supporting mitigation efforts. Earlier this year, Enterprise hosted a policy event on Improving Disaster Recovery and Building Community Resilience. Convening a group of current and former government officials, disaster recovery and resilience experts, and fair housing advocates, this event highlighted the need for permanently authorizing the CDBG-DR program at HUD. It also identified recommendations for HUD to speed up the recovery process, provide grantees with more guidance and support, and facilitate fairer recovery outcomes.
- Implement innovative strategies to identify and address communities’ affordability challenges
JCHS emphasizes the need for identifying and implementing innovative solutions to create new sources of revenue for housing development and addressing the nation’s affordability challenge. Throughout 2018, Enterprise conducted research and released reports on promising strategies for expanding the supply of affordable homes. In June 2018, we released a white paper on Proven Local Strategies For Expanding the Supply of Affordable Homes and Addressing Cost Challenges. It draws on the successes of some of the country’s most expensive areas to offer options to communities working to address the scarcity of affordable homes and the rising cost of development, focusing on four key strategies: leveraging existing assets, creating public funding opportunities, utilizing land use controls and improving the approval process. Furthermore, Enterprise’s Policy Development and Research team launched a research initiative to examine gentrification and its implications for policymaking. Last year, we released a white paper, Gentrification: Framing Our Perceptions, and a Gentrification Comparison Tool to examine and demonstrate how the various definitions and measures of gentrification can lead to different outcomes, which in turn influence policy responses to changing conditions in low-income communities.
Enterprise’s previous research reports continue to be relevant as the need for addressing the shortage of affordable homes and challenges in development cost continue to be prevalent across the country. These reports include: Understanding the Small and Medium Multifamily Housing Stock; Public Benefits from Publicly Owned Parcels: Effective Practices in Affordable Housing Development, and Bending the Cost Curve: Solutions to Expand the Supply of Affordable Rentals.
- Pursue solutions on the state and local level to help address the national affordability challenge
JCHS points out that with persisting affordability challenges, state and local jurisdictions last year leveraged ballot measures to raise new funds for affordable housing. Overall, voters across the country displayed a willingness to be taxed and a strong interest in solving the problems of affordability and homelessness that, in some places, seem to be only getting worse. For example, California’s voters approved State Propositions 1 and 2 to authorize a $4 billion bonds issuance for affordable housing and veteran homeownership, as well as an additional $2 billion to be repaid using existing funds generated from the Mental Health Services Act to provide services for homeless populations with serious mental illness. Voters in Portland (OR) also approved Measure 26-199, authorizing $653 million in bonds for affordable housing. Voters in other cities across the country, such as Austin (TX) and Charlotte (NC), also approved ballot measures authorizing significant funds for affordable housing development.
JCHS also notes that state and local governments have enacted legislative changes to provide tenants with more protections. The New York State Legislature recently adopted a sweeping set of reforms to significantly increase tenant protections across the state, while permitting building owners to recoup a smaller amount of investment for building upgrades. The New York Legislature also amended the New York State human rights law to include source of income as a protected class. Earlier this year the Colorado State Legislature enacted the Residential Tenants Health and Safety Act, legislation that requires landlords to provide safe, clean and healthy homes for their tenants according to state habitability standards and building codes. In addition, the Washington State Legislature recently adopted legislative changes that strengthen tenants’ rights, particularly around rising rents and displacement. Enterprise supported the passage of these reforms by working closely with advocates and meeting regularly with state legislators and government officials to advocate for policies that strengthen and expand tenants’ rights.