Homeownership and Affordable Housing a Key Part of Upward Mobility, but Hard to Come By

by Jennifer Molinsky
Senior Research Associate

Earlier this week, the MacArthur Foundation released the results of its third annual How Housing Matters survey. Conducted by Hart Research, the survey of 1401 adults identifies a strong belief in the importance of stable, affordable housing to achieving a middle class lifestyle. But affordability challenges that respondents have experienced in their own lives, and see in their communities, contribute to a sense of pessimism about Americans’ chances of social mobility, and a majority still feels that the country is in the midst of the housing crisis that began 8 years ago.

Several findings resonate with our recent work at the Joint Center. As our forthcoming State of the Nation’s Housing report will show, the persistent problem of housing affordability continues to cause households to make difficult trade-offs. Over half of survey respondents reported making sacrifices in the past three years in order to pay for housing. The most common was to take on a second job or work more hours. Worryingly, a number of other trade-offs bode ill for peoples’ futures: many respondents reported that they have stopped saving for retirement, are accumulating consumer debt, and are cutting back on food and healthcare in order to meet housing costs. These stop-gap measures, necessary to ensure the rent or mortgage is paid, may add to financial and health strains later on. Renters, cost-burdened/distressed owners, younger adults, minorities, lower-income respondents, and city-dwellers are most likely to have made at least one trade-off in the past three years.

The survey also explored beliefs about upward mobility and found that, particularly for those with lower incomes, stable, affordable housing or owning a home is seen as one of the most important factors in achieving a middle class lifestyle (Figure 1). But a majority think that finding quality, affordable housing in their own community to rent or buy is challenging. And across age, race, and income levels, respondents expressed significant pessimism about the chances of rising from a lower economic class to the middle class, and believe it is harder for younger people today to save for retirement, own a home, find stable, decent-paying employment, and have a stable, affordable housing situation. Fully 79 percent think that middle class people fall into a lower economic class more frequently than the other way around.

Source: How Housing Matters, 2015, Hart Research &  MacArthur Foundation

One of the least optimistic groups of respondents were those aged 54-64, 85 percent of whom thought that downward economic mobility is more likely in today’s world than upward mobility.  This group was the most likely age cohort to see housing affordability as a serious problem in the nation. As our own research points out, those aged 50-64 were hit particularly hard in the housing crisis; as a whole, the age cohort’s homeownership rate declined by 5 percentage points from its 2005 peak, many saw a loss of wealth and have been living with stagnating wages, and the group has higher levels of housing and consumer debt than in the past. Member of this group who are housing cost burdened (paying more than 30 percent of their income on housing) make difficult trade-offs including forgoing retirement savings – again setting up the potential for greater difficulties in the future.

Though the 50-64 year olds are most likely to view housing affordability as a serious problem, their worries are shared with the other age cohorts surveyed in How Housing Matters. Sixty percent of all respondents think that affordable housing is a serious problem in the nation today, and 61 percent believe we are still in the midst of a housing crisis – with one in five thinking the worst is still to come.

As we head into a presidential election season, skepticism about the ability of Washington to intervene effectively, as well as ideological beliefs about the government’s role in solving this problem, present some clear hurdles to making affordable housing part of the national discussion. Over half of respondents (53 percent) believe that housing affordability is not the responsibility of the federal government. Follow-up interviews revealed that many in this group who see housing affordability as a serious problem are unclear about what government can do.  They also lack confidence that federal intervention would be effective, or have ideological concerns about federal involvement. Yet the survey also identifies some opportunities. Though just over half stated that housing affordability is not a federal responsibility, 49 percent of respondents feel that housing affordability should be a very or fairly high priority in Washington and slightly more believe it should be a very/fairly high priority at the state and local levels – yet only 14 percent believe it already is (Figure 2).

Source: How Housing Matters, 2015, Hart Research &  MacArthur Foundation

Among the reasons for ensuring that housing is a higher priority on the policy agenda, respondents found that the relationship between housing and children’s health and well-being among the most compelling: the belief that living in safe neighborhoods in quality, stable housing helps children’s mental, social, and academic development and allows families to spend more on their education and enrichment. Linking housing affordability to children’s well-being – as well as highlighting the sacrifices made by millions of cost-burdened elderly and low-income households – may help make the case that housing does indeed matter. 

Democracy and the Challenge of Affordability: The Case of Housing

by Quinton Mayne
Harvard Kennedy School

This post kicks off a month-long series that our colleagues at the Ash Center for Democratic Governance and Innovation are doing on affordable housing as a challenge to the health of American democracy, and in particular local democracy in the United States. The series, edited by Harvard Kennedy School Assistant Professor Quinton Mayne, is part of the Ash Center’s Challenges to Democracy series, a two-year public dialogue inviting leaders in thought and practice to name our greatest challenges and explore promising solutions.

Over the past two years, the Ash Center has welcomed leading experts from across the country to debate the structural weaknesses preventing the United States from achieving its democratic potential. Democracy demands an equal right of participation; but as the Challenges to Democracy public dialogue series has shown, the formal design and practical workings of America’s political institutions are preventing the full realization of participatory equality. Some of the key challenges covered in our series to date include the erosion of voting rights and access, the decline of social movements, and the integration of immigrants into political life.

In addition to metrics of participation related to voice and input, democracy can also be judged by its outputs. When public officials produce policies responsive to the needs and demands of citizens, democracy would appear to be in good health. But are elected politicians enacting laws and designing programs in line with popular preferences? Answering this question from the point of view of affordability, there is good reason to question the health of American democracy.

Long before the Great Recession struck in 2008, affordability posed a major problem for the American middle-class dream. The rising costs of health care and college education have made the headlines for many years now. Energy and gasoline prices also cycle in and out of the news, and in the past half-decade or so the cost of child care has grown in importance. The devastating effects of the recession on individuals and families across the nation, coupled with the organized groups and movements that emerged and strengthened in defense of those affected by the recession, brought a much-needed urgency to the issue of affordability.

Despite this heightened attention and the public policies and programs it has produced, democratically elected officials in city halls, state capitols, and the corridors of power in Washington, D.C. are struggling to systematically respond to the challenge of affordability.

Nowhere is the democratic challenge of affordability more obvious than in the case of housing. According to a 2014 report issued by Harvard’s Joint Center for Housing Studies, 35 percent of U.S. households in 2012 were in housing that they could not afford. In other words, just over one in every three American households was paying in excess of 30 percent of their income in housing alone. If we break down this statistic and look just at renters, more than 50 percent are cost-burdened. The picture becomes even more alarming when we train our gaze on Americans with lower levels of income. Among households with annual incomes of less than $15,000 – which roughly equates to working year-round at the federal minimum wage – more than four out of every fifth household spent 30 percent or more of its income on housing, and almost 70 percent spent more than half their income on housing.

These are shocking statistics. They are also politically troubling ones because they suggest that large numbers of Americans with pressing need are being underserved by the democratic process. Governments across the U.S. may not be able to eradicate housing unaffordability, but they certainly have the tools and means to reduce it greatly below current levels. That they have not been able to do so to date poses a major democratic challenge, and one that we will be looking at in this series of seven posts on the Challenges to Democracy blog.

Over the next month we will be publishing commentaries and thought pieces from authors that we have invited to examine the issue of housing affordability principally through the lens of local government. As a complex issue shaped by a variety of social and economic forces, the problem of affordable housing cannot be addressed by cities alone. State and federal policy is also fundamentally important. That being said, many cities have fiscal and legislative resources at their disposal that can be used to improve the current situation.

Some of these municipal resources can increase residents’ access to affordable housing through indirect means. This includes investments in public transit and the regulation of local labor markets. Other resources are more direct: cities can increase the supply of affordable housing through financial support and direction provision. Crucially, cities also enjoy far-reaching land-use and zoning powers that can profoundly affect Americans’ access to affordable housing. In the blog series we will be looking at how and why city governments are succeeding and failing in using their resources and powers to tackle the widespread burden of housing costs.

The opening blog posts focus on the problem at hand. In the first post, Adam Tanaka, a doctoral student in urban planning at Harvard’s Graduate School of Design, interviews officials overseeing a newly created innovation lab that aims to tackle the problem of housing affordability in the City of Boston in the coming years. The second post by Margaret Scott, a Master in Urban Planning candidate at the Graduate School of Design, considers how housing affordability has been suburbanized in recent years and the difficulties that this new geography poses for those hoping for government action.

The next two blogs focus squarely on the real demands that responding to the challenge of housing affordability places on politicians and the public sector. Given the magnitude of the problem, achieving an adequate supply of affordable housing requires local politicians with bold visions for the future who are able to build and manage broad coalitions of economic and social actors. The third post, also from Adam Tanaka, addresses this question of the pressing need for coalition building and governmental ambition by considering the affordable housing plans recently announced by Mayor de Blasio of New York City. As in many other advanced industrial democracies, public housing authorities have long served as important vehicles for local governments in the U.S. to meet affordable housing need. In our fourth post, Margaret Scott reflects on whether public housing could hold the key to unlocking supply to address the current housing affordability challenge.

The final posts turn to the role that grassroots activism plays in alleviating the burden of unaffordable housing. Focused on a non-profit that has operated in Boston for four decades, our fifth post by Adam Tanaka looks at the power of community organizations not only to place demands on elected politicians to get more affordable housing but also to serve as partners with the public sector to plan and deliver affordable housing. Our final post is by two documentary filmmakers, Andrew Padilla and King Williams, who were featured speakers in our November 2014 panel discussion, The Politics of Displacement in the American City. In their post, Padilla and Williams reflect on the role that they and other filmmakers have played in raising awareness of the problem of housing affordability and galvanizing support in favor of more effective government action.

As the blog series will show, the challenge of generating an adequate stock of affordable housing in the United States does not appear to be wanting for policy prescriptions or technical solutions. The problem instead appears to lie at the feet of elected politicians. That so many Americans are today burdened by the cost of housing (as well as the cost of child care, health care, and college education) is attributable to policy choices made by governments over many years. This is not to downplay the difficulty of tackling the problem of affordability either in the past or the present. As our blog posts confirm, the task at hand is a demanding one: elected officials must attend to a complex and changing constellation of forces and actors, and they cannot act alone. That being said, the challenge of responding to the clear and present need for affordability remains fundamentally a democratic one.

Read more posts in the Challenges to Democracy series.

Quinton Mayne is Assistant Professor of Public Policy in the Kennedy School of Government at Harvard University and a member of the Joint Center for Housing Studies Faculty Committee. His research and teaching interests lie at the intersection of comparative and urban politics.

With More than 2 Million Units at Risk, How Can the U.S. Preserve its Affordable Rental Housing Stock?

by Irene Lew
Research Assistant

As our most recent State of the Nation’s Housing report confirms, the renter affordability crisis shows no signs of abating, with more than one in four renters spending over 50 percent of their income on housing in 2012. With the Great Recession pushing up the number of very low-income households that qualified for rental assistance by 3.3 million between 2007 and 2011 (a 21 percent increase), the number of available subsidized rental units has not kept pace—the share of eligible households able to secure aid dropped from 27 percent to 24 percent over this period.

Given the growing demand for subsidized rental housing, preserving the existing stock of affordable housing has become critical. In our report, we analyzed data from the National Housing Preservation Database to determine what types of federally subsidized units with assistance tied to them are particularly vulnerable to loss over the next decade, due to expiring contract or affordable-use restrictions. (The other two primary forms of assisted housing are public housing developments and units rented in the private market using Housing Choice Vouchers.)

Using the database, we determined that contracts or affordable-use restrictions for more than 2 million federally assisted rental units will expire between 2014 and 2024. This amounts to 43 percent of federally subsidized units. Rental units subsidized through two programs—the Low-Income Housing Tax Credit (LIHTC) program and HUD-funded project-based rental assistance—represent 85 percent of housing with expiring contracts or affordability restrictions (see Figure 33). Project-based rental assistance includes Project-based Section 8, as well as Project Rental Assistance Contracts (PRACs) that provide rental assistance to low-income older adults and those with disabilities. 

Over half (57 percent) of the units with expiring restrictions in the coming decade are subsidized through the LIHTC program, while those with project-based rental assistance account for 28 percent. Units in properties supported by HOME funding and those subsidized with USDA Section 515 Rural Rental Housing Loans represent 9 percent, while another four percent are in properties with FHA mortgage insurance, and the remaining 3 percent are subsidized through older HUD programs.

Units in properties subsidized with project-based rental assistance are vulnerable to being removed from the affordable stock because these programs are subject to annual Congressional appropriations, which have continued to decline. The Senate Appropriations Committee’s recent approval of the Fiscal Year 2015 Transportation-HUD Appropriations Bill included a $200 million reduction in project-based rental assistance from the Fiscal Year 2014 enacted level. These budget cutbacks come on the heels of sequestration, which reduced the amount of available funding for project-based rental assistance contracts and forced HUD to short-fund thousands of contracts in 2013 to prevent them from expiring. Short-funding refers to the practice of partially funding renewals in the form of yearly contracts, thereby deferring ongoing costs to future fiscal year budgets in order achieve cost savings today. However, this practice creates uncertainty for owners by adding more complexity to ongoing property financing and operations.

With short-funding becoming so common for the project-based assistance program, over half of the 596,000 units with contracts expiring over the next decade will come up for renewal in 2014 and 2015 alone.  As federal funding becomes more uncertain and HUD struggles to fund existing project-based contracts, fewer owners who are eligible for contract renewals may decide that it is feasible to continue to rent to low-income households, increasing the likelihood that these properties may leave the affordable rental housing stock. And should budget shortfalls continue, HUD may have no choice but to allow some project-based rental assistance contracts to expire even if the owners want to remain in the program.

Meanwhile, units in properties subsidized through the LIHTC program are less vulnerable to removal from the affordable stock, although they represent the lion’s share of units with affordability periods expiring over the next decade. Between 2014 and 2024, approximately 1.2 million LIHTC units will reach the end of their 15- or 30-year mandatory affordability period and are eligible to leave the program. Owners of these properties have three options: apply for another round of tax credits, maintain the property as affordable housing without new subsidies, or convert the property to market-rate housing. For the most part, according to a 2012 HUD report, LIHTC properties that reached the end of their required 15-year affordability period continue to operate as affordable housing without new subsidies. These properties remain affordable without new subsidies for several reasons: they obtain a nonprofit sponsor with a long-term commitment to continuing affordability, they have project-based subsidies such as Section 8 that the owner does not want to give up, and/or the LIHTC rents vary little from market rents. Properties at higher risk for conversion to market-rate housing tend to be owned by for-profit owners in high-cost markets.  While the LIHTC program is not subject to annual appropriations, it could be endangered by comprehensive tax reform that would take a close look at these types of tax expenditures. But given the importance of the LIHTC program in both new production and preservation of affordable rental housing, it does have broad political support.

Given the gap between the demand for rental assistance and the number of assisted units available, there is a clear need for greater efforts to both preserve and expand affordable rental housing developments. Preservation initiatives such as HUD’s Rental Assistance Demonstration (RAD) help ensure that approximately 16,100 rental units in privately-owned properties subsidized through older project-based assistance programs (Rent Supplement and Rental Assistance Payment) remain affordable even after their nonrenewable contracts expire. Yet, RAD only addresses a small part of the growing need for preserving such housing.

Meanwhile, promising large-scale initiatives such as the National Housing Trust Fund have stalled due to lack of funding. Signed into law in 2008 as part of the Housing and Economic Recovery Act, the fund is a permanent program not subject to annual appropriations and has the potential to preserve a substantial share of federally assisted rental housing while also adding new affordable units. The fund was also the first new production program targeted to households with extremely low incomes since the creation of the Section 8 program in 1974. Unfortunately, the program remains unfunded to this day. Initially, it was to be financed with contributions from the GSEs, but these contributions were suspended indefinitely once Fannie Mae and Freddie Mac were taken over by FHFA in 2008. Most proposals for GSE reform, including the Johnson-Crapo bill making its way through the Senate, include some provision to fund affordable housing, but it remains unclear when Congressional action will occur, and what form, if any, the final legislation will provide for affordable rental housing.    

Rental Supply is Catching up with Strong Demand, but not for Affordable Units

by Elizabeth La Jeunesse
Research Assistant

The Joint Center’s new State of the Nation’s Housing report summarizes ongoing and emerging trends in U.S. rental markets.  Foremost among these is the strength of demand for rental housing, which continued to soar in 2013 albeit at a slower pace relative to recent years.  Indeed, from 2005 to 2013, the U.S. saw a net increase of around 740,000 renter households per year.  This far exceeds historical renter household growth of around 410,000 per year on average from the 1960s through the 2000s.

With rental demand soaring, supply of multifamily rental units—which house over 60 percent of all renter households—did not keep up.  In 2009, for example, construction began on just 109,000 multifamily units.  According to apartment data from MPF Research, demand exceeded new additions to supply by nearly 200,000 units during 2010, and by 170,000 units in 2011.  Rental markets tightened as a result of this excess demand.  Rents rose, occupancy rates climbed to 95 percent for professionally managed apartments, and rental property values reached new peaks. 

But as of 2012, supply picked up and demand eased, bringing the two closer in line with each other (see Figure 5, from our report below).  Indeed, that year demand for apartments outpaced supply by only 21,000 units.  Last year the two measures came even closer into alignment.  Completions of new, professionally managed apartment units reached 163,000 in 2013, marginally exceeding the increase in the number of occupied units.  In other words, supply and demand lined up fairly evenly. (Click charts to enlarge.)

Relative equilibrium also became evident in a slight easing of rent pressures.  Indeed, growth in rents for professionally managed units lowered to a still-healthy rate of around 3.0 percent on average in 2013, down from 4.0 percent two years earlier.  Growth in net operating income for owners of large apartments moderated to 3.1 percent in 2013, down from between 6 and 11 percent in 2011-12 according to data from the National Council of Real Estate Fiduciaries.  The annual rate of return on rental property investment likewise lowered to a more modest but sustainable 10.4 percent, about the same as in the ten years preceding the housing bubble and bust (1995-2004).

While supply of multifamily units rebounded at the national level, the story is more varied across metro areas.  In over half of the nation’s largest metro areas, the volume of permits for new multifamily units in 2013 remained below last decade’s average.  For example, previously booming metros including Las Vegas, Chicago, Atlanta and Phoenix all saw permitting decline by 25 percent or more compared to levels seen between 2000 and 2009 (see Figure 25, from our report) Yet several metros in Texas, as well as Denver, Seattle, Los Angeles, and Washington D.C. registered growth relative to that boom period.  Demand would need to remain strong in such areas to absorb this future supply.

Not all segments of the market are in balance either.  Demand for units affordable to low-income renters and families far exceeds the supply of available units.  An Urban Institute analysis indicates that in 2012, 11.5 million extremely low income households competed for just 3.3 million affordable, available units.  This suggests a supply gap of 8.2 million units needed to house extremely low-income renter households, up from a gap of 5.2 million units ten years earlier.  Lack of affordable, available housing often requires struggling households to pay excessive shares of their income on housing, reducing the money they have left over to buy other goods and services, such as food and healthcare.

As Daryl Carter, Chairman of the National Multifamily Housing Council, pointed out during the webcast release of our new report, greater attention needs to be focused on the types of units being built to ensure that they meet the affordability and sizing needs of today’s renter households. These include not only low income households, but also an increasing number of families with children, a group who saw particularly steep declines in homeownership rates since the Great Recession.  Panelists on the webcast also emphasized the importance of federal rental assistance measures to address the undersupply of affordable units, as well as steps local communities and developers can take.  These include relaxing zoning rules to allow more residential construction and tying affordable housing plans to development projects at the local government level.

What Will Stop the Slide in Homeownership Rates? Keep Your Eye on Incomes.

by Chris Herbert
Research Director

As highlighted in our new State of the Nation’s Housing report, the national homeownership rate declined for the 9^th straight year in 2013 and now stands at its lowest point since 1995 (see Figures 18a and b, from our report, below). The falloff in homeownership has affected a broad range of demographic groups, but has been most severe among those in their late 20s through their early 40s, with their rates down at least 8 percentage points since 2004. In fact, while the overall homeownership rate is still slightly above the pre-boom rate of 64 percent, the share of households age 25-44 owning a home is at its lowest point since annual data became available in the early 1970s. Since these are prime ages for both first-time and trade up homebuyers, this substantial decline in owning has been an important reason for the continued weakness in the housing market.  

Predicting when homeownership rates will stabilize—and possibly turn back up— must begin with an understanding of what’s been driving the downturn.  There are many culprits. The dramatic fall in home values, which decimated housing wealth and forced millions into foreclosure, has made everyone far more aware of the financial risks associated with buying a home. Still, our analysis, and a variety of other surveys, indicate that the majority of young adults want to own a home someday. So changing preferences for owning would not seem to account for such a dramatic falloff in the homeownership rate over such a short period.

The incredible increase in the use of student loans is no doubt also a contributing factor.  Between 2001 and 2010 the share of 25-34 year olds with student loans rose from 26 to 39 percent.  And since 2010 the total amount of student debt outstanding has increased by about 40 percent.  At the same time, however, the median amount owed among 25-34 year olds only rose from $10,000 to $15,000 between 2001 and 2010, which should not be a substantial deterrent to buying a home.  Our analysis also found that the share of these young borrowers with high amounts of debt ($50,000 or more) rose from 5 to 16 percent, but this still a minority of all households in this age group. A recent Brookings Institution report came to a similar conclusion, finding that the median loan payment to income ratio has not exceeded historical levels.  So while mounting student loan debt and increasing delinquency among these borrowers is not the main reason young Americans are deferring homeownership, it is certainly a factor.

Today’s far more restrictive mortgage underwriting standards are another limitation for those looking to buy a home.  The decline in lending to borrowers with credit scores in the 600s has pushed up the average score for new borrowers well into the 700s. Since roughly half of all consumers have credit scores under 700, this is making it hard for many to qualify for mortgages. While there are some indications that lenders are starting to relax their standards, so far there hasn’t been much movement in the average score for borrowers.

But at a fundamental level, it may not be necessary to look much further than trends in household incomes to explain the rise and fall in homeownership over the past two decades.  Median household income for 25-34 year olds and 35-44 year olds grew sharply from 1994 through 2000, during a period when homeownership rates showed steady gains. Growth in homeownership then slowed as incomes softened during the mid-2000s (see Figure 4, from our State of the Nation's Housing report, below).

While many blame lax underwriting for driving the homeownership rate boom, in fact much of the gains occurred during the 1990s when the economy was producing solid income growth. Since 2006, median household incomes have fallen substantially for those 25-44, with the homeownership rate declines mirroring these trends.  In fact, just as the share of households 25-44 owning a home is as its lowest point since the early 1970s, the real median household income for this age group is at its lowest point since 1972. So, while young households are facing a number of headwinds to buying a home, until we see a resumption in income growth we are unlikely to see an upturn in homeownership rates.

Millennials the Key to a Stronger Housing Recovery

The U.S. housing recovery should regain its footing, but also faces a number of challenges, concludes The State of the Nation’s Housing report released today by the Joint Center. Tight credit, still elevated unemployment, and mounting student loan debt among young Americans are moderating growth and keeping millennials and other first-time homebuyers out of the market.

The housing recovery is following the path of the broader economy.  As long as the economy remains on the path of slow, but steady improvement, housing should follow suit.

Although the housing industry saw notable increases in construction, home prices, and sales in 2013, household growth has yet to fully recover from the effects of the recession. Young Americans, saddled with higher-than-ever student loan debt and falling incomes, continue to live with their parents.  Indeed, some 2.1 million more adults in their 20s lived with their parents last year, and student loan balances increased by $114 billion.

Still, given the sheer volume of young adults coming of age, the number of households in their 30s should increase by 2.7 million over the coming decade, which should boost demand for new housing. Ultimately, the large millennial generation will make their presence felt in the owner-occupied market, just as they already have in the rental market, where demand is strong, rents are rising, construction is robust, and property values increased by double digits for the fourth consecutive year in 2013.

One key to realizing the millennials’ potential in the housing market is for the economy to grow to the point where their incomes start to rise. Another important factor is how potential GSE reform will affect the cost and availability of mortgage credit for the next generation of homebuyers, which will be the most diverse in the nation’s history. By 2025, minorities will make up 36 percent of all US households and 46 percent of those aged 25–34, thus accounting for nearly half of the typical first-time homebuyer market.

The report, as well as an interactive map released by the Joint Center, also highlights the ongoing affordability challenge facing the country, as cost burdens remain near record levels and over 35 percent of Americans spend more than 30 percent of their income for housing. The situation is particularly grim for renters, where 50 percent are cost burdened and 28 percent are severely cost burdened (meaning they spend over half of their income for housing).

Click map to launch; may take a few seconds to load.

When available, federal rental subsidies make a significant difference in the quality of life for those struggling the most.  Between 2007 and 2011, the number of Americans eligible for assistance rose by 3.3 million, while the number of assisted housing units was essentially unchanged. Sequestration forced further cuts in housing assistance, which have yet to be reversed.