Why Building More Homes Won’t Solve The Affordable Housing Problem
The problem is that millions of people lack the income to afford what鈥檚 on the market.
Even before 2020, the U.S. faced an acute housing affordability crisis. The COVID-19 pandemic after millions of people who lost their jobs . While eviction bans forestalled mass homelessness 鈥 and 鈥 most moratoriums have now been lifted, putting a lot of people at risk of losing their homes.
One solution pushed by the , and and is to increase the supply of affordable housing, such as by reforming zoning and other land-use regulations.
As on , we agree that increasing the supply of homes is necessary in areas with rapidly rising housing costs. But this won鈥檛, by itself, make a significant dent in the country鈥檚 affordability problems 鈥 especially for those with the most severe needs.
In part that鈥檚 because in much of the country, of rental housing. The problem is that millions of people lack the income to afford what鈥檚 on the market.
Where The Crisis Hits Hardest
Renters with the most severe affordability problems have extremely low incomes.
Nationally, about 45% of all renter households spend more than 30% of their pretax income on rent 鈥 the widely recognized . About half of these renters, 9.7 million in total, spend more than 50% of their income on housing, greatly and putting them at risk of becoming homeless.
Nearly two-thirds of renters paying at least half of their income on housing earn less than $20,000, which is . Renters with somewhat also struggle with housing affordability, but the problem is most pervasive and most severe among very-low income households.
For a household earning $20,000, $500 per month is the highest affordable rent, assuming the affordability standard of spending no more than 30% of income on housing. In contrast, the median rent in the U.S. in 2019 was , a level that鈥檚 affordable to households earning no less than $43,880.
And homes that rent for $500 or less are exceedingly scarce. Fewer than 10% of all occupied and vacant housing units rent for that price, and 31% are occupied by households earning more than $20,000, pushing low-income renters into housing they cannot afford.
A Pervasive Problem
The problem of housing affordability doesn鈥檛 affect only a few high-cost cities. It鈥檚 pervasive throughout the nation, in the priciest housing markets with the lowest vacancy rates like New York and San Francisco, and the least expensive markets with high vacancy rates, such as Cleveland and Memphis.
For example, in Cleveland, with a , 27% of all renters spend more than half of their income on rent. In San Francisco, with a , 18% of renters spend at least half their income on rent. And it鈥檚 even worse for the poorest residents. In both cities, more than half of all extremely low-income renters spend at least 50% of their income on rent.
There is not a single state, metropolitan area or county in which a full-time minimum wage worker can afford the 鈥渇air market rent鈥 for a two-bedroom home.
In fact, there is not a single state, metropolitan area or county in which a full-time minimum wage worker , as designated by the U.S. Department of Housing and Urban Development.
Even the smallest, most basic housing units are often unaffordable to people with very low incomes. For example, the necessary to sustain a new 225-square-foot efficiency apartment with a shared bathroom in New York City built on donated land is $1,170, affordable to households earning a minimum of $46,800. That鈥檚 way out of reach for low-income households.
At the heart of the nation鈥檚 affordability crisis is the fact that the cost to build and operate housing simply exceeds what low-income renters can afford. Nationally, the , excluding mortgage and other debt-related expenses.
In other words, even if landlords set rents at the bare minimum needed to cover costs 鈥 with no profit 鈥 housing to most very-low-income households 鈥 unless they also receive rental subsidies.
The Subsidy Solution
Covering the difference between what these renters can afford and the actual cost of the housing, then, is the only solution for the nearly 9 million low-income households that pay at least half their income on rent.
The U.S. already has a program these people afford homes. With , also known as Section 8, recipients pay 30% of their income on rent, and the program covers the balance. While some landlords using vouchers, overall the in the lives of those receiving them.
The currently serves about 2.5 million households, or only 1 in 4 of all eligible households. The current version of Democrats鈥 would gradually expand the program by about over five years at a total cost of $24 billion.
While this would be the single largest increase in the program鈥檚 nearly 50-year history, it would still leave millions of low-income renters unable to afford a home. And that鈥檚 not a problem more supply can solve.
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