Housing Inadequacy Remains a Problem for the Lowest-Income Renters

Irene Lew
Research Analyst

In the early 1970s, in response to growing concerns about the housing conditions of poor families, the US Department of Housing and Urban Development (HUD) developed a measure of housing adequacy for its American Housing Survey (AHS) that continues to be used by the agency today. This adequacy measure was originally designed to evaluate the extent to which the national housing stock met the standard of “a decent home and a suitable living environment” established by the Housing Act of 1949. While the condition of the housing stock has improved over the past several decades, the rental stock is still three times more likely than the owner-occupied stock to be considered inadequate. And problems persist among the most affordable rentals.

While fairly complex, the AHS adequacy measure factors in various housing problems related to plumbing, heating, electrical wiring, and maintenance. Using this AHS measure, the majority of the nation’s rental housing stock is in physically adequate condition. As of 2013, just 3 percent of occupied rental units were categorized as severely inadequate and 6 percent were moderately inadequate. In fact, the adequacy of the rental stock has improved over the past decade, with the share of rentals categorized as physically inadequate declining from about 11 percent in 2003 to 9 percent in 2013. 

Notes: Inadequate units lack complete bathrooms, running water, electricity, or have other deficiencies. 

Source: JCHS tabulations of HUD, American Housing Surveys.

Stricter building codes have certainly helped to encourage higher quality, particularly the construction of units with complete plumbing and heating systems. As a result, severe physical deficiencies have been rare among the rental stock, especially among newer rentals. Just 1 percent of rentals built 2003 and later was classified as severely inadequate, compared to 4 percent of those built prior to 1960.

It is noteworthy, however, that the AHS adequacy measure does not account for certain health-related quality issues such as the presence of mold or structural issues such as holes in the roof or foundation, so housing quality problems may in fact occur at higher rates than the survey reports. And although physical deficiencies have become less common among the nation’s rental housing stock, housing problems disproportionately appear in units occupied by the lowest-income renters. In 2013, 11 percent of units occupied by extremely low-income renters (those with incomes less than or equal to 30 percent of area medians) were physically inadequate, compared to just 7 percent of those with incomes above 80 percent of area medians.

Notes: Extremely low / very low /  low income is defined as up to 30% / 30–50% / 50–80% of area median income. Inadequate units lack complete bathrooms, running water, electricity, or have other deficiencies.

Source: JCHS tabulations of HUD, 2013 American Housing Survey.

The lowest-income households also accounted for the largest share of renters reporting overcrowded conditions and physical housing problems such as toilet breakdowns, exposed electrical wiring, heating equipment breakdowns lasting six hours or more and the presence of rats in the unit. 

Notes: Extremely low / very low /  low income is defined as up to 30% / 30–50% / 50–80% of area median income Overcrowded conditions refer to units where there are more than two people per bedroom. Holes in the floor are those that are about four inches across.  

Source: JCHS tabulations of HUD, 2013 American Housing Survey.

Matthew Desmond’s most recent book, Evicted, vividly captures these statistics, drawing attention to the grim housing conditions of families in low-rent units in inner-city Milwaukee who must live with the constant presence of roaches and other vermin, clogged sinks and bathtubs, holes in their windows, and broken front doors.

Rentals occupied by extremely low-income households in central cities have the highest physical inadequacy rates, especially those located in small multifamily buildings with 2-4 units. Indeed, 16 percent of these units were categorized as inadequate, compared to 12 percent of those in buildings with 50 or more units. As I pointed out in a previous post, small multifamilies are a critical source of low-cost housing because they tend to charge lower rents than those in much larger structures, but much of this stock is rather old and at higher risk of loss from the affordable stock due to deterioration.

As this recent NPR piece suggests, the narrow margins for mom-and-pop landlords operating in low-income neighborhoods do not provide sufficient incentive for landlords to make improvements or repairs in a timely manner. Indeed, according to the American Housing Survey, 13 percent of extremely low-income renters reported in 2013 that the owner of their unit usually did not start major repairs or maintenance quickly enough, compared to less than half that share (6 percent) among higher-income renters with incomes above 80 percent of area medians.

The prevalence of housing deficiencies among units occupied by the lowest-income renters highlights the importance of bolstering building code enforcement efforts at the state and local levels. However, municipalities are often faced with tight budgets that lead to dwindling code enforcement teams. Indeed, according to one estimate in 2013, Cleveland and Detroit, among others, have cut their code enforcement workforce by about half since the middle of the last decade. Cities like Baltimore, Portland, and the San Francisco Bay Area are also facing shortages of building inspectors that make it difficult to deal with building code violations. While increased code enforcement can identify landlords who are failing to maintain their properties, this could also lead to unstable housing situations for current tenants. Renters may withhold rent or call local building inspectors as a tactic to push landlords to make necessary repairs, but this could lead to eviction threats or the initiation of a formal eviction process due to nonpayment of rent.

At the federal level, budgetary constraints have also impacted efforts to address the physical deficiencies among the aging public housing stock, which was largely built before 1970. Federal appropriations for the public housing capital fund fell by 34 percent over the past decade and HUD is faced with an estimated backlog of $26 billion in capital maintenance and repairs (as of 2010). HUD’s housing choice voucher and project-based rental assistance programs, which subsidize rentals for low-income households in the private market, require landlords to pass annual or biennial inspections for housing quality. However, the public housing stock is not subject to regular inspections and has largely been prohibited from using private capital to finance capital needs and repairs. As a result, compared to other types of assisted rentals, physical housing problems are more common among the public housing stock. In 2013, over half (53 percent) of public housing units had more than two heating equipment breakdowns lasting at least six hours and 13 percent of units had water leaks due to equipment failures within the previous 12 months.

Living in unsafe, physically inadequate housing can lead to adverse health and developmental outcomes for low-income families. Indeed, recent research confirms that children exposed to defects such as leaking roofs, broken windows, rodents, and nonfunctioning heaters or stoves were more likely to experience emotional and behavioral problems. Among five housing characteristics studied—quality, stability, affordability, ownership, and receipt of housing assistance—poor physical quality of housing was the most consistent and strongest predictor of emotional and behavioral problems in low-income children and adolescents. Poor housing conditions such as mold, chronic dampness, water leaks, and heating, plumbing, and electrical deficiencies, are also associated with health risks like respiratory illness and asthma. These findings underscore the urgent need for cities to prioritize code enforcement and work collaboratively with nonprofit tenants’ rights groups to deal with landlords who are not responsive to requests for necessary repairs.

Renters Also Have Healthy Housing Concerns

Elizabeth la Jeunesse
Research Analyst

The Joint Center recently released a working paper highlighting American consumers’ concerns and awareness of “healthy housing” issues, which include indoor air quality, water quality and other indoor environmental concerns. One of the more compelling findings of the study was that renters expressed healthy housing concerns at a higher rate than homeowners. Indeed, 36 percent of renters we surveyed reported some level of healthy housing concerns or suspected risks, while only 24 percent of homeowners did. Indoor air quality issues were most prevalent—including dust, dampness and moisture, lack of sufficient ventilation, and other indoor-air related problems including air pollution from outdoors. Other major concerns included water quality, and basic safety issues such as pests, and concerns about the physical structure.

Notes: Sample size is 820.  Renter households were asked, “In the past few years, how concerned have you been about your current rental home negatively affecting your or another occupant’s health?  This may include but is not limited to concerns related to mold/moisture, indoor air quality, asthma, chemicals in the home, noise insulation problems, light issues or other “healthy housing” issues important to you.“

Source: JCHS tabulations of Healthy Home Renter Survey (Summer 2014), The Farnsworth Group

Renters’ high level of concern is not surprising. Results from the American Housing Survey (AHS) showed that as of 2011 renters scored as worse off than owners across nearly every measure of healthy-home risks and concerns. Renters were more likely to live in inadequate housing conditions, encounter mold, musty smells and second-hand smoke from other units, as well as report hazards (loose railings, broken steps, insufficient illumination for stairs) than homeowners.

Along with these indoor issues, health risks in these places can be compounded with higher outdoor air pollution. Results from the 2013 AHS further showed that renters were more likely to report living close to highways/railroads/airports (20 percent) compared to homeowners (9 percent). Another 7 percent of renters reported living near industrial areas, compared to only 3 percent of homeowners. The higher concentrations of outdoor air pollution in these areas can infiltrate the home when ventilation methods do not allow for adequate air filtration.

Another factor that may contribute to renters’ concerns is the condition of their units. The rental housing stock is older, with a median building age of 43 years, vs 38 years for owner-occupied homes. Many older rental structures were not designed to modern standards for indoor environmental health. For example, many older multifamily buildings lack any basic ventilation systems for cooking with gas-stoves. Renters also tend to live in closer proximity to each other, with over 60 percent of renters living in multifamily buildings (vs. 11 percent of homeowners). The associated wear and tear of higher turnover, and neighbors’ behavior such as smoking indoors, can impact renters’ quality of life.

Rental property owners’ maintenance and upkeep behaviors certainly also influence renters’ satisfaction with their living conditions. But while most state and municipal sanitary and housing codes govern most basic issues such as structural integrity and pests, they rarely incorporate newer research on indoor environmental quality concerns. These concerns include formaldehyde in building products, inadequate or non-existent ventilation for gas-stove cooking, second-hand smoke, and other off-gassing chemicals (e.g., VOCs) from indoor furnishings such as carpets and flooring.

The chart below provides a snapshot of renters’ specific indoor environmental concerns based on our survey results, beyond basic issues typically addressed by housing codes. As it shows, air quality and other indoor issues impacted renters living in both single- and multi-family homes. Dust and moisture concerns were most common. Renters also expressed awareness of chemical issues, including from the building itself but also from interior products/furnishings/carpeting. Among renters living in multifamily structures, noise issues and odors or smoke from neighboring units were also cited frequently.

Notes: N=239, including 80 renters living in single family detached homes and 159 renters living in multifamily or attached homes. Renter households that expressed some basic interest/concern over indoor environmental issues were asked, “Of the following healthy home issues, how would you rate your level of concern/interest over the past few years regarding your current rental home?“

Source: JCHS tabulations of Healthy Home Renter Survey, The Farnsworth Group.

While individual renters can take some minor steps to mitigate indoor environmental risks at home, most renters are limited by the fact that they do not own their units, and therefore have little incentive for—if not an outright prohibition from—making physical modifications to their home. Therefore integrated, long-lasting healthy housing solutions will need to come from multiple stakeholders, including not only property owners, managers and developers, but also building product manufacturers, as well as those who regulate the rental industry. All of these stakeholders should examine ways to incentivize, increase our understanding of, and promote healthier rental housing, including ways to make effective healthy housing strategies for renters more cost-effective.

The growing market for energy efficient housing may set a precedent for how healthy multifamily solutions might take hold. Recently numerous articles have highlighted the good business sense of pursuing energy efficiency. As a recent McGraw Hill study suggested, multifamily builders find that customers are willing to pay more for “green” units. While energy efficiency also saves on energy bills, healthy-home advancements in rental properties can potentially increase resident retention and satisfaction—both of which are of economic benefit to the rental industry.

With the ongoing, rapid development of research related to healthy housing, as well as the tendency of consumers to seek out information on this topic, we expect to see demand in this area to grow in the future. Indeed, as awareness of healthy housing research and risks grows, renters are likely to increase their demand for healthy housing attributes. Rental property owners who can get out in front of this trend may be better poised down the line to capitalize on the growing demand for health-conscious home environments.

Read the working paper

Why Does Affordable Housing Need Saving?

Alexander von Hoffman
Senior Research Fellow

In recent years the skyrocketing housing prices in major cities in the United States have raised the specter of driving out people who cannot afford to pay the increasingly high rents. Many housing advocates argue that the most practical way to prevent dislocation of the poor is to save government-subsidized privately owned low-income rental dwellings.

Why does such “affordable housing” need to be saved? After all, you might point out, public housing doesn’t change into private market housing.

In fact, subsidized rental housing is quite different than public housing. Begun in the 1930s under President Franklin Roosevelt, public housing was created and managed solely by government agencies. Under subsidized housing programs, the first of which started about 1960, the federal government gave various financial incentives to private nonprofit and for-profit companies to build, manage, and own rental projects for low-income households. Public housing was pretty much all government; subsidized low-income housing took the form of public-private collaborations.

Most significantly, the projects under the two housing programs ran for dramatically different lengths of time. The federal government financed public housing over such long terms – with sixty year construction loans, for example – as to make it seem almost permanent. In contrast, the terms of the subsidies under public-private housing schemes were relatively short – most for only twenty or twenty-five years.

Back in the 1960s and ‘70s, the authors of the subsidized housing programs gave little thought to what would happen when the subsidies ended. But years later, when the subsidies began to expire, people realized that enormous numbers of low-income dwellings could easily disappear. Poor people would have no place to live. In response, housing advocates raised the cry, “preserve affordable housing!”

New Franklin Park Apartments in Boston, Massachusetts

The story of how people realized that privately owned subsidized housing needed to be saved and how they went about saving it is the subject of my newly published Joint Center for Housing Studies working paper, “To Preserve Affordable Housing in the United States: A Policy History.”

For some time now, I have been examining the subject of public-private low-income housing. Unlike public housing, remarkably few people know about these programs. Ask about them and you might get a vague response, “Is that Section 8?” Such unawareness is remarkable because these subsidized housing programs have created millions of low-income rental units, far more than public housing has.

I first studied the origins and causes of America’s subsidized low-income housing and published my findings in an article, “Calling Upon the Genius of Private Enterprise: The Housing and Urban Development Act of 1968 and the Liberal Turn to Public-Private Partnerships” published in the journal Studies in American Political Development (October 2013).

Now in the Joint Center working paper, I have explored the way America’s public-private housing policy unfolded.

Skyview Park Apartments in Scranton, Pennsylvania

My research reveals that the public-private housing programs created in the 1960s and 1970s were highly productive but beset by troubles. Buffeted by bad underwriting, weak management, and economic hard times, many of the early housing projects deteriorated. Housing advocates for the poor jumped in to rescue the troubled projects from defaulting, becoming unlivable, or both. After studying the problems, the advocates sought ways to buttress the incomes of financially troubled housing projects or convey them to responsible parties. In Washington, sympathetic federal officials implemented new programs and procedures to help the advocates stabilize the conditions of the beleaguered properties.

The process, I found, created a cadre of experienced and informed housing activists and government officials. So when the subsidies of the housing programs began to expire in the 1980s, these policy veterans threw themselves into preventing the low-income residential stock from either deteriorating or being converted to expensive private-market housing.

Their efforts, however, set off a political backlash from the owners of the housing who insisted on the right to do what they wanted with their property, including cashing out. The two sides fought each other in the courts, Congress, and federal government until the late 1990s when they compromised and joined forces.

Since then, a broad coalition – including advocates for the poor, for-profit and nonprofit developers, government officials, and philanthropic institutions – coalesced to support preservation of affordable housing. Since the 2000s, the National Housing Trust, with the support of the MacArthur Foundation, has led a highly successful campaign to enlist state and local governments in the cause.

In short, the plethora of programs and efforts to maintain the subsidized low-income housing has become a key component of America’s low-income housing policy. Perhaps it is not surprising, then, that people now suggest preservation of affordable housing as a practical way to prevent displacement of the poor.

Read the working paper

Neighborhood Change and the Right to the City

Adam Tanaka
JCHS Meyer Fellow

Adam Tanaka reviews Priced Out: Stuyvesant Town and the Loss of Middle-Class Neighborhoods by Rachael A. Woldoff, Lisa M. Morrison and Michael R. Glass.

This post is cross-posted from Metropolitiques.eu

 --

New York City’s Stuyvesant Town is the largest housing development in Manhattan, and also one of the most controversial and most studied. Adam Tanaka reviews the latest contribution to studies of Stuyvesant Town, by Rachael A. Woldoff, Lisa M. Morrison and Michael R. Glass. Gentrification and rent deregulation have changed the composition of the development, and longtime renters now coexist with younger and wealthier households. Woldoff et al. explore this coexistence using ethnographic methods, and situate the transformation within a broader shift to a neoliberal housing policy.

Stuyvesant Town and Peter Cooper Village as seen from the air over the East River looking north (cc) Alec Jordan/Wikimedia Commons

Stuyvesant Town: between myth and reality

Seventy years after opening its doors to World War II veterans, Stuyvesant Town remains by far the largest housing development in Manhattan. The project looms over the Lower East Side, with its 35 red-brick towers, 8,755 apartments and superblock design providing a marked contrast to the surrounding urban fabric. Stuyvesant Town also remains one of the city’s most controversial real-estate developments. In its early years, the project was a maligned symbol of urban renewal and racial segregation. More recently, the development sparked heated debates about the viability of middle-class housing in Manhattan as it was bought and subsequently foreclosed upon in the largest real-estate transaction and mortgage default in American history.

The project has also been the subject of considerable research. Historian Samuel Zipp’s Manhattan Projects (2010) explored the politics of development and the culture of early occupancy, while real-estate journalist Charles Bagli’s Other People’s Money (2013) drew attention to the financial speculation that drove the highly leveraged purchase of the complex in 2006 and the subsequent post-recession fallout. Priced Out: Stuyvesant Town and the Loss of Middle-Class Neighborhoods, co-written by Rachael A. Woldoff, Lisa M. Morrison and Michael R. Glass, also examines the most recent chapter of the Stuyvesant Town story. But rather than studying the elite politicking of private investors and public officials that animated Bagli’s book, Priced Out shifts its focus to the politics of everyday life within the complex.

In particular, the authors explore the impacts of rent deregulation on the social composition of this previously “stodgy” middle-class neighborhood. As younger, market-rate residents have gradually replaced older, rent-stabilized tenants, a “curious menagerie” has come to occupy Stuyvesant Town’s anonymous red brick towers (p. 3). Using ethnographic methods, the authors examine the intergenerational and class conflicts between the project’s various subgroups, and the role of management in exacerbating tensions. Criticizing the economistic focus of much housing scholarship, Woldoff et al. argue that it is impossible to fully understand transformations in the city’s housing market without examining how these changes affect the social dynamics of specific communities.

The book is structured in four parts. First, the authors provide a brief historical overview of Stuyvesant Town’s origins. The authors then describe Stuyvesant Town’s evolution from a racially segregated veterans’ community focused almost exclusively on child-rearing to an increasingly disparate mixture of rent-stabilized seniors and new market-rate renters, comprising students, professionals and young families drawn to the project’s convenient downtown location.

Inset chapters describe the policy context driving the deregulation of the city’s middle-income housing stock. The authors pinpoint New York State’s Rent Regulation Reform Act of 1993 and Vacancy Decontrol Law of 1997 as watershed moments in the transformation of Stuyvesant Town from a relatively stable middle-class community to a so-called “luxury rental” development. They situate these changes within a broader paradigm shift from a managerial urban housing policy with state-enforced rent controls to an increasingly neoliberal agenda promoting the “invisible hand” of the market at the expense of permanently affordable housing.

Daily life in a community in flux

The authors’ principal focus, however, is on how the transformation of Stuyvesant Town from community to commodity has impacted daily life. “What is it like for such different groups to live in Stuy Town together?” they ask. “Are all of these residents happy here? How long do they plan to stay?” (p. 3). These questions are explored through interviews with 49 residents across the range of subgroups living in the project. In-depth “vignette” chapters describe the experiences of representatives of the two resident groups perhaps most at odds with each other.

Chapter 3 tells the story of Ruthie, who has lived at Stuyvesant Town since 1948. Ruthie describes the transformation of the neighborhood from an age- and income-homogeneous community to a diverse set of groups with competing interests and expectations. While Ruthie herself is relatively indifferent to these changes—and highlights moments of collaboration between young and old—she relates anecdotes of other senior citizens who feel victimized by managerial decisions that they feel promote the interests of young residents at their expense.

Chapter 7 explores life at Stuyvesant Town from the perspective of Kara, a senior-year student at nearby New York University (NYU). Kara is emblematic of the trend of “studentification” in Lower Manhattan’s private rental sector. Pre-existing residents argue that they cannot compete with students willing to subdivide apartments and split the rent, particularly when such practices are encouraged by revenue-maximizing landlords. With college-based social networks and a short-term view of her residency, Kara’s relationship to Stuyvesant Town differs from that of long-standing residents. Like Ruthie, Kara does not recount any out-and-out conflicts between her and her elderly neighbors. She views the area without sentimentality, as a temporary housing solution rather than a community in which she has a deep stake.

Change at Stuyvesant Town: a neoliberal story?

While Priced Out’s ethnographic research is balanced and precise, giving equal weight to the various constituents in Stuyvesant Town’s “curious menagerie,” the book stumbles when trying to tie the story to broader political-economic and theoretical concerns. The authors situate Stuyvesant Town’s transformation from rent-regulated to market-rate housing within a structural shift from a Fordist–Keynesian to a neoliberal urban-policy paradigm. At first glance, this appears to be a plausible analytic framework. On closer inspection, however, it becomes clear that the authors’ use of a neoliberal framework is more of a hindrance than a help.

Critiques of neoliberalism tend to romanticize either the state or the community as the appropriate scale of social management; Priced Out does both. The authors contend that “New York City’s policies in the mid-twentieth century were in keeping with larger societal ideals grounded in justice and pragmatism, in which housing was viewed as a right” (p. 101). But the early history of Stuyvesant Town itself directly contradicts such a thesis. Not only did the project benefit from significant public subsidies to clear a low-income neighborhood in favor of a racially homogeneous, middle-class enclave—hardly a policy of “justice and pragmatism”—but its contractual arrangements guaranteed only 25 years of rent controls, tied to ongoing tax abatements, after which MetLife, a life-insurance company turned developer, could charge market rents—hardly a vision of housing “as a right.” While the authors argue that Stuyvesant Town was built due to “a need for middle-class families to have access to affordable housing in the city,” they fail to acknowledge that the project was as much—if not more so—driven by a rationale of fiduciary profit and the upgrading of Manhattan’s property values: nothing short of state-sanctioned gentrification.

It is not only the state’s historic role in social welfare provision that is uncritically embraced, however. Priced Out also romanticizes the notion of community as an ahistorical and morally upright social unit, without unpacking its complexities. Many scholars have explored the question of whether community—particularly middle-class community—is a necessarily exclusionary concept, a literature with which Woldoff et al. do not engage or even acknowledge (see Herbert Gans, The Levittowners, 1982; Suzanne Keller, Community: Pursuing the Dream, Living the Reality, 2003; and Robert Nelson, The Private Neighborhood, 2005, among others). Instead, they lament the disintegration of a previously homogeneous urban neighborhood, implicitly suggesting that cities work best when composed of a mosaic-like fabric of introverted communities.

Whose “right to the city”?

The authors deploy urban theorist Henri Lefebvre’s concept of “the right to the city” to assert the primacy of existing residents’ claims to the neighborhood over the rights of newer, richer tenants. The authors assert that, historically, “Stuyvesant Town provided a sense of place” and a “sense of stability,” qualities currently being eroded by market pressures (pp. 38–39). But who qualified for entry into that community in the first place? The authors admit that MetLife’s original leasing procedures were hardly meritocratic. Beyond the racial restrictions, many early tenants had professional or personal connections with the life insurers that fast-tracked their applications and left others to languish on the waitlist for years, if not decades. What of their “right to the city”?

In contrast to the original tenants, who apparently came in search of “the promise of community,” the authors castigate new, market-rate residents for using the development “as a foothold to begin an ambitious life in New York City, or as a stepping stone on the way to an aspirational, higher-status residence” (p. 184). This is also a simplistic dichotomy. Many of Stuyvesant Town’s early tenants were driven into the project by a desperate postwar housing shortage as much as any romanticized notions of community life—arguably exactly the same reasons why so many people are willing to pay exorbitant market rents to live in Stuyvesant Town’s institutional tower blocks today.

Many of the project’s early tenants also benefited from rent controls to build up savings and later purchase a home, using Stuyvesant Town as both foothold and stepping stone to homeownership—possibly the prime function of urban rental housing. There is nothing wrong—and indeed, much right—with arguing that pre-existing residents should have a greater right to the community by dint of longevity of tenure. But the authors do not grapple with the thorny issue of how to evaluate, let alone rank, rights-based claims to shelter, and they tend to romanticize the motives that drew residents to Stuyvesant Town in the first place.

Neighborhood politics: possibilities and constraints

The book’s most intriguing moments come when the authors engage with the multifaceted meanings and uses of Stuyvesant Town to different resident groups. They describe how Stuyvesant Town is appropriate for senior living; single-floor apartment layouts and elevators are convenient for mobility-impaired residents, while proximity to major hospitals in “Bedpan Alley” make trips to the doctor less stressful. At the same time, the authors show that many aspects of Stuyvesant Town’s design and location are convenient to younger residents. Students from nearby universities and young professionals working in Midtown are drawn to the walk-to-work location, while young families appreciate the lack of through traffic and the plentiful recreational facilities.

In the book’s closing pages, the authors also acknowledge the importance of politics—or the process of collectively binding decision-making—to the future of increasingly age- and income-diverse urban neighborhoods. “In order to achieve community in the city, the heterogeneous groups who inhabit the same space must establish strong relationships and unify politically in pursuit of their best interests,” they write, in a statement that could apply to urban governance more generally (p. 192).

Whether the pursuit of disparate interests can be achieved through political action is a promising avenue for further research, and arguably more fruitful than the authors’ reliance on an orthodox neoliberal framework. That said, any analysis of political organizing at the neighborhood scale must also engage with the role of both public and private sectors in structuring outcomes. After all, in the recent October 2015 sale of Stuyvesant Town to private equity giant Blackstone and Canadian pension fund Ivanhoe Cambridge, the new landlord’s pledge to maintain affordable rents in 5,000 apartments for another 20 years was as much a product of closed-door negotiations between investors and politicians as it was a result of direct community action.

Bibliography

• Bagli, Charles. 2013. Other People’s Money: Inside the Housing Crisis and the Demise of the Greatest Real-Estate Deal Ever Made, New York: Penguin.
• Gans, Herbert. 1982. The Levittowners: Ways of Life and Politics in a New Suburban Community, New York: Columbia University Press.
• Keller, Suzanne. 2003. Community: Pursuing the Dream, Living the Reality, Princeton: Princeton University Press.
• Nelson, Robert. 2005. Private Neighborhoods and the Transformation of Local Government, Washington, DC: The Urban Institute.
• Zipp, Samuel. 2010. Manhattan Projects: The Rise and Fall of Urban Renewal in Cold-War, New York, Oxford: Oxford University Press.

Home Conversions – and Reconversions – Expected to Generate More Remodeling Activity

Kermit Baker
Senior Research Fellow

During the housing bust, and continuing into this housing recovery, large numbers of owner-occupied homes have been converted to rental units. Distressed owner-occupied homes that were foreclosed or sold as short-sales often ended up as rentals because, given the weakness in the housing market and broader economy, few households were looking to buy or were able to buy. Private investors often bought up homes built for owner-occupancy once they saw the strong demand for rentals and the rising rents that these homes commanded.

Once the housing market settles and the demand for homeownership begins to pick up, it is likely that many of these homes will filter back into the owner-occupied housing stock. What will this process look like, and how much modification will be undertaken after this transition occurs? To begin to think about this issue, the Joint Center looked at homes that have already gone through this process; namely owner-occupied homes that have been converted to rentals, and then converted back to owner-occupancy.

While this phenomenon didn’t get much attention until the recent housing crash, it turns out to be fairly common. Starting with owner-occupied homes in 1995 from the American Housing Survey, we tracked these homes for the next 20 years to see which ones changed tenure. Almost a quarter (23.4%) of homes in this 1995 cohort was converted to a rental at least once over this period. While multifamily condos were the most likely type of owner-occupied home to be converted – over half of these condos was rented at least once over this period – so were over a third of single-family attached and manufactured homes, as were over 20% of single-family detached homes.

Note: Sample composed of owner-occupied units in 1995 that were occupied in at least 7/10 surveys from 1995-2013. 

Source: JCHS tabulations of HUD, 1995-2013 American Housing Surveys

Typically, homes that were converted to rentals were somewhat less desirable than homes that were continuously owner-occupied over this period. On average, they 

• are older – pre-1940 homes were 50% more likely to be converted than homes built after 1990,
• have a lower value – homes valued at $100,000 or less were twice as likely to be converted as homes valued at $200,000 or more,
• and are more likely to be located in central cities.

No doubt reflecting the lower value of these homes, spending on home improvement projects was generally lower. For the periods that they were owner-occupied, spending on homes that would be converted to rentals averaged 10% to 15% less than the average for all owner-occupied homes.

The pattern of home improvement spending on converted homes is particularly interesting. For homes that were converted to rentals and then converted back to homeownership, spending on home improvement projects was over 20% below average prior to being converted to a rental unit, and almost 20% above average after that same rental unit was converted back to homeownership.

Notes: Rental sample composed of occupied units in 1995 that were occupied in at least 7/10 surveys from 1995-2013 and were owner-occupied in at least two surveys before first rental period and after last rental period. Average spending is calculated for years in which the unit was owner-occupied. Broader sample composed of occupied units in 1995 that were occupied in at least 7/10 surveys from 1995-2013 and were owner-occupied in at least one survey. 
Source: JCHS tabulations of HUD, 1995-2013 American Housing Surveys

It may be that owners were underinvesting knowing that the home would be converted to a rental, or just the opposite – that the home was converted to a rental because it was in poor enough condition that a sale was difficult. Likewise, after reconversion to an owner-occupied home, higher spending may reflect the need to fix it up after a period of renting, or that the new owner wanted to upgrade the home or customize it to the household’s needs.

There are over four million more rental units now than there were in 2010, and over eight million more than there were in 2005. As many of these rental units return to the owner-occupied stock, we’ll see a boost in home improvement spending. On average, almost $1,000 more is spent per year on home improvements for a home that is converted from renting to owning as compared to a home converted from owning to renting. For every million rentals converted back to homeownership, therefore, there is expected to be almost a billion dollars more spent each year on home improvement activity. 

Millennial Housing Issues in Perspective: Visualizing Cohort Trends in Population Size, Household Numbers, Ownership and Renting

George Masnick
Senior Research Fellow

Today’s 41 million young adults age 25-34 have been slow to move into independent household formation and homeownership. Exactly how slowly and why, and what the future likely holds for these individuals over the next decade, is the subject of much debate. The magnitude of delayed household formation and homeownership can perhaps be better appreciated if we directly compare this young cohort of adults with the cohorts that preceded them in the age structure. The four figures below track the different cohorts’ trends between 2003 and 2013 in population size, total households, owner households and renter households as measured by the American Housing Survey.

Population Size

Figure 1 shows population size of five different 10-year birth cohorts. The youngest cohort (born 1979-1988) remained fairly constant in size between 2003 and 2013 at about 41 million. This number is slightly larger than the next oldest cohort (born 1969-1978), but not as big as the cohort born 1959-1968, which includes younger baby boomers.

The cohorts born from 1959-1968 and 1969-1978 increased slightly in size over the 2003-2013 period due to migration from abroad, underscoring the fact that cohort size among young and middle-age adults can still grow as we go forward. Why the 1979-1988 birth cohort did not also increase in size between 2003 and 2013 (it actually declined by about 300,000) is likely due to the effects of the Great Recession having had a bigger impact on 25-34 year-old immigration. The growth in the total number of annual undocumented immigrants actually turned negative during this period, and slow job growth in construction and manufacturing also had a large impact on slowing overall immigration into the under 35 age groups.

U.S. immigration law still promotes family re-unification as one of its core principles, and this provision was less impacted by the economic downturn than employment driven immigration, and probably resulted in a more sustained immigration of 35-44 and 45-54 year olds. In addition, undocumented immigrants in these age groups were more likely to have lived here longer and have children born in the U.S., so they were less likely to have left the country during the Great Recession.

From 2003-2013, the two oldest cohorts between age 55-64 and 65-74 lost population due to mortality. The oldest (born 1939-1948) declined by 22 percent and the next oldest (born 1949-1958) lost 11 percent of its population.

Number of Households

Figure 2 shows parallel cohort trends in the number of households produced by the population in Figure 1. Three things are noteworthy. First, most of a cohort’s contribution to household growth occurs as it moves from age group 15-24 to 25-34, as is visible in the sharp upturn in households among the leftmost (youngest) cohort in Figure 2. Second, the cohort born 1969-1978 (red line) appears to have formed fewer households in 2013 at age 35-44 relative to older baby boomers at the same age than its population size might have predicted. The 1969-1978 cohort is not on track to attain the household numbers achieved by the 1959-1968 and 1949-1958 cohorts (green and purple lines). Third, the two oldest cohorts, although having lost a significant share of their populations from mortality, did not reduce their household numbers proportionally.

Lower levels of household formation in the youngest two cohorts when compared to baby boomers are somewhat expected because they contain higher shares of both foreign born and minority native born, each of which have lower rates of forming independent households. They are also cohorts that have experienced delayed marriage and fertility among the native-born non-minority population, making independent household formation for the youngest members of the cohort as a whole even less likely. But if members of these cohorts are simply postponing marriage and family formation, household formation for many is also being postponed, so future upward movement in household trajectories when cohorts are still under age 45 is likely.

The fact that household numbers after age 55 do not drop as quickly as population numbers is because married couples head most households in older age groups, and if one spouse dies, the household generally survives. In addition, divorce in middle and old age generally turns one household into two, partly offsetting deaths that occur to persons who live alone. After age 75, losses from mortality increase dramatically, so it will not be until after 2020 for the oldest baby boomers, and after 2030 for the youngest and largest baby boomer cohort that significant declines in older owner households take place.

Owner and Renter Household Trends

Decomposing the cohort trends in total household numbers into owners and renters further refines our understanding of the demographic underpinnings of recent household and housing market dynamics. The youngest cohort’s shortfall in household formation, as it moved into the 25-34 age group, was especially severe on the owner side, as shown in Figure 3.

In spite of having a noticeably larger population at age 25-34 compared to the next oldest cohort (red line), and a slightly larger number of total households at the same age, owner households were almost a million fewer. In addition, this next oldest cohort also shows levels of owner household formation well below what was achieved by the cohort born 1959-1968 (green line) when it was age 35-44 in 2003. Finally, the 1959-1968 cohort had slightly fewer owners in 2013 than the next oldest cohort (purple line) at age 45-54 despite having both 4+ million more people and 1.2 million more total households. But we must not lose sight of the fact that the older 1959-1968 and 1949-1958 cohorts aged into their 40s and 50s during a very different economic period (1993-2003) with better income growth, looser mortgage lending standards and more affordable newly built housing. The number of owner households that these older cohorts achieved at ages 25-34, 35-44, and 45-54 might not be a proper benchmark by which to judge the progress of today’s younger cohorts.

Figure 4 shows that in 2013, the number of renters in the youngest cohort at age 25-34 was significantly larger than the number of owners (11 million compared to 8 million). This compares to much greater parity between the number of owners and renters in the next oldest cohort when it was age 25-34. Although the number of owners in the youngest cohort was well below the number of renters in 2013, the increase in owners between 2003 and 2013 was still larger than the increase in renters.

Looking forward, the 1979-1988 cohort is going to add many more owners over the next 10 years, while at the same time its number of renters should decline when the cohort moves between ages 25-34 and 35-44, given historical cohort transitions. In fact, this youngest cohort should continue to add owners and lose renters over the next three decades until it reaches ages 55-64. Of course, the exact numbers of owner additions will be determined by the state of the economy, by income trends, by housing prices and mortgage interest rates, and by lending practices of banks and mortgage companies. To a certain extent, future homeowner numbers will also be determined by future demographic trends in marriage, fertility, immigration and mortality that affect this age group, but these are less likely to involve significant departures from recent historical levels and are more predictable.

By examining the cohort trends in the numbers of population, households, owners and renters in the way we have, we gain a greater appreciation of the degree to which millennials have been slow to form owner households. But we also find that the next older cohort, born 1969-1978, is also well below levels achieved by baby boomers when they were the same ages. There remains room for much upward movement in owner household formation for these two youngest cohorts. However, it is unlikely that these cohorts will ever reach the 16 million owner households achieved by each 10-year baby boomer cohort without significant reductions in the obstacles they now face in becoming and remaining homeowners. Still, we should look forward to continued gains in owner household formation for the two youngest cohorts as they move into their 40s and 50s over the next decade and beyond.

Evicted: Confronting Some Uncomfortable Truths

Chris Herbert

Managing Director

Matthew Desmond’s new book Evicted: Poverty and Profit in the American City is just being released today, but it has already generated an amazing buzz which started with an article in the New Yorker a few weeks back, and has continued with reviews and commentary in major news outlets across the country. His bottom line conclusion that “without stable shelter everything else falls apart” is a message that housing advocates have long felt keenly. Given that the country’s serious housing challenges have failed to make an appearance at any Presidential debate, the substantial public attention the book is generating is profoundly important.

I got the chance to read an advance copy of the book myself and finished it this past weekend. As someone familiar with Desmond’s work and with a strong interest in trying to bring attention to the desperate straits that some 11 million renter households face by having to devote more than half their income to rent, I expected to be moved by the book’s up-close-and-personal depiction of struggling renters in Milwaukee. While I was certainly moved, what I didn’t expect was how challenged I would be by Desmond’s account.

The Joint Center for Housing Studies has for many years been documenting both the magnitude and consequences of a lack of affordable housing through meticulous analysis of national survey data to help fuel the policy debate. But while numbers may inform the head, they don’t move the heart and so by themselves have a hard time moving the needle on policy. Housing advocates have come to appreciate the importance of personal stories in putting a face on the numbers. The Make Room campaign, launched by Enterprise Community Partners in the past year, is a particularly effective attempt at documenting powerful stories of struggling renters to help sway hearts as well as minds.

Desmond’s stories are also powerful, but in a very different way. The Enterprise campaign focuses on people who have been undone by sickness and other life events outside their control, who struggle to make a decent living, not from lack of trying, but by a lack of good paying jobs. In contrast, Evicted largely tells the story of people who are dealing with what often seem like self-inflicted wounds—drug addiction and questionable choices about how they spend what little money they have, people who are prone to violence and seem to make only sporadic attempts to work. In short, while Enterprise shines on a light on the so-called ‘deserving poor,’ Desmond doesn’t shy away—in fact, seems to seek out—the “undeserving” poor; people whose own families and social networks often refuse to offer assistance.

But through the course of the book, and with the support of hundreds of footnotes that draw on the academic literature and put forth more of Desmond’s own arguments, he builds a convincing case for how the circumstances of grinding poverty lead to choices that otherwise might be hard to understand and how drug addiction and a history of abuse and deprivation exert a powerful tide that is extremely hard to escape. In short, Desmond forces readers to confront their own embedded notions of the “deserving poor.”

One of the most thought-provoking aspects of the book for me was a footnote that confronts this issue directly. Desmond notes that liberals tend to ignore the “nastier, more embarrassing aspects of poverty.” Citing William Julius Wilson, he argues that this approach will ultimately fail to garner support anyway as the public wants to see these behaviors taken into account. Lambasting this approach, Desmond writes, “There are two ways to dehumanize: the first is to strip people of all virtue; the second is to cleanse them of sin.” He’s right. We do need to construct a policy argument that accounts for the sinners as well as the saints—not least of all because no one’s a saint.

Evicted has also challenged my thinking about how the housing market operates at the lowest rungs of the ladder. On its face, the rental market would appear to fit the classic competitive model: there are many buyers and many sellers, information on rent levels is fairly easily available, and there are few barriers to becoming a landlord. Sure, rents are quite high relative to property values, but wouldn’t high maintenance costs, the very real risk of non-payment of rent, and the costs of carrying out evictions account for the high rents? Maybe in part. But the examples Desmond details suggest that, even after taking these costs of doing business into account, the returns earned by landlords are extremely high. The most telling example is the $16,900 house in relatively good condition in a stable block. The mortgage payment on such a small mortgage would be less than $100 monthly. Even with property taxes and maintenance factored in, it wouldn’t take much rent to earn a decent return. And he notes the landlord had acquired other properties for as little as $5,000.

So why aren’t these markets more competitive? One barrier to entry is the lack of access to capital by those who are looking to live in these neighborhoods. Given what’s involved in managing these properties, there may be few landlords who are willing to take on property ownership under these conditions, limiting competition. Landlords also have over a barrel those tenants with a history of eviction, a criminal record, or no visible means of support. With the need for housing so fundamental, landlords can extract the lion’s share of a household’s income. As Desmond notes, researchers have focused a great deal of attention on the provision of subsidized housing but very little on the supply of non-subsidized, low-cost rental housing where a large majority of the poor find their homes. As this book makes clear, this is a major oversight.

So what does Desmond propose as policy responses? To begin with, he advocates for an entitlement program for low-income renters to obtain housing vouchers in the private market. This proposal is actually not that radical, as the Bipartisan Policy Center Housing Commission made this same recommendation. There is a strong case for such a policy, particularly for those at risk of homelessness who are profiled in Evicted. The short-term outcomes report by Abt Associates for the Family Options Study provides compelling evidence that providing housing vouchers to families coming out of the shelter system produces more stable living situations, reduces domestic violence and substance abuse, keeps families together, and reduces the number of school moves among children. And it achieves these results at no greater cost than the traditional assistance families receive coming out of shelters. Desmond also advocates for publicly provided legal assistance for renters in eviction hearings. Given the stories presented in Evicted, there is a clear need to level the playing field between landlords and tenants. If tenants have access to universal vouchers, landlords will have less to worry about in terms of unpaid rent.

The one part of Desmond’s recommendations that puzzled me is that he suggests relaxing housing quality standards as part of a universal voucher program to entice more landlords to participate. He argues in a footnote that in countries where such programs exist without quality standards, tenants are able to use the market power of their voucher to choose higher quality units. But given how the current system exploits renters’ vulnerabilities to accept appalling housing conditions, I would worry about leaving the market to determine this outcome.

In fact, Desmond makes a forceful case that exploitation of the poor thrives when it comes to essentials like housing and food. For that reason it might also have been useful to consider including some recommendations about expanding property ownership among those who would be less likely to exploit the poor—including the poor themselves. In cities like Milwaukee where home prices in inner city neighborhoods are so low, homeownership may be a cost-effective solution for some. More ownership of low-cost rentals by the public or non-profit sectors could also provide needed competition for for-profit landlords.

What’s also missing from his recommendations are supports beyond just rental assistance that are needed to address some of the root causes of instability, such as treatment for addiction and mental health disorders. Housing assistance is a critical step but by itself may not be sufficient to help people become stable tenants. But Desmond is focused on the housing part of the equation and so can’t be faulted for looking at all the ways we need to shore up our social safety net.

Overall, Evicted tells a powerful story and presents persuasive evidence about the fundamental importance of housing instability as a cause and a consequence of poverty, and in the process makes a compelling case for the need to foster housing stability as part of efforts to address poverty. Evicted is that rare book that will generate spirited thought and discussion not only among a general audience but also among those of us who spend a great deal of time trying to understand the critical interplay between housing affordability, poverty, and social mobility.

--

On Thursday, March 3 at 6 PM The Malcom Wiener Center for Social Policy at the Harvard Kennedy School is holding a book launch event for “Evicted: Poverty and Profit in the American City” with author Matthew Desmond, Co-director of their Center’s Justice and Poverty Project, along with a distinguished panel. View their event flier >

HUD Funding in the Presidential Budget Prioritizes Economic Mobility and Rental Assistance

Irene Lew
Research Analyst

Several weeks ago, President Obama released his final budget proposal to Congress. In it, the President requests $48.9 billion in gross discretionary funding for HUD—a $1.6 billion increase over the amount that Congress appropriated in FY 2016. With the exception of the Community Development Block Grant (CDBG) and the public housing capital fund, HUD’s FY 2017 budget maintains or requests increases for key programs over the levels that lawmakers approved in FY 2016 (Figure 1).

Source: US Department of Housing and Urban Development, FY 2017 Congressional Justifications; White House Office of Management and Budget FY 2017 President’s Budget 

Funding for Rental Housing Assistance

More than three-quarters (78 percent) of the funding request would support 4.5 million low-income households through HUD’s three largest rental housing assistance programs: housing choice vouchers, project-based rental assistance, and public housing (through its capital and operating funds) (Figure 2).

Source: US Department of Housing and Urban Development, FY 2017 Congressional Justifications.

After several years of uncertainty in the wake of sequestration in 2013, the request of $20.8 billion for the housing choice voucher program would fully fund all voucher renewals in calendar year 2016. The request includes a 26-percent boost in administrative fees to cover public housing agencies’ (PHAs) costs to administer the voucher program under a new formula based on the recommendations of a HUD-commissioned study released last year that highlighted the underfunding of PHAs.

Meanwhile, the budget would provide a full 12 months of funding for all contracts under the project-based rental assistance program, including public housing units and privately-owned units that were converted to long-term project-based Section 8 contracts under the Rental Assistance Demonstration (RAD) program. For the second straight year, HUD is seeking $50 million to expand the RAD program and remove the 185,000 unit cap on the number of public housing conversions under the first phase of RAD. Since it received Congressional authorization in 2012, RAD has been a key part of HUD’s strategy to access private capital to rehabilitate and preserve the aging public housing inventory, which has experienced a net loss of 139,000 units since 2000. Until RAD’s authorization, HUD’s public housing program was largely prohibited from accessing non-federal funding sources for making critical repairs to the stock. As of December 2015, HUD estimates that PHAs and their partners have raised over $1.7 billion through RAD to convert more than 26,000 public housing units.

With an increased emphasis on public housing RAD conversions, the request for the public housing program in FY 2016 was a marginal increase—less than 1 percent—over the FY 2016 enacted level. The budget proposes a 2 percent reduction for the public housing capital fund, which is troubling given that the public housing stock has an estimated capital needs backlog of about $26 billion, and that adequacy issues among public housing units are much more common than among other types of federally assisted and unassisted units. While RAD will help address adequacy issues in the public housing inventory, there is no guarantee that RAD funding will continue, and the ongoing disinvestment in the public housing capital repairs fund may offset gains made under RAD.

Meanwhile, the President’s budget also requests funding increases for key multifamily rental housing assistance programs administered by the US Department of Agriculture (USDA) that serve roughly 403,000 low-income households annually in rural communities, including $33 million for the Section 515 Rural Rental Housing Loans program, up 18 percent from $28 million enacted in FY 2016, and $1.4 billion for the Section 521 Rural Rental Assistance program, a modest increase (1 percent) from the FY 2016 enacted level.

Commitment to Ending Homelessness

Funding for homelessness prevention remains a priority in the President’s budget, which includes an 18 percent increase in discretionary funding over the FY 2016 enacted level for Homeless Assistance Grants. The increase will fund $25 million in new projects for homeless youth in coordination with the Department of Health and Human Services (HHS), an additional 25,500 new units of permanent supportive housing targeted at the chronically homeless, and 8,000 new rapid rehousing units for homeless families. Overall, in contrast to many other HUD programs whose funding levels have declined sharply over the past decade in real terms, funding for homeless assistance grants is now 43 percent higher in FY 2016 than in FY 2006 (Figure 3).

Note: Percent change is based on dollar values that have been adjusted for inflation using the CPI-U for All Items.
Source: White House Office of Management and Budget; US Department of Housing and Urban Development FY 2017 Congressional Justifications.

Building on the findings in HUD’s recent Family Options report highlighting the effectiveness of vouchers in improving the housing stability of homeless families, the budget is seeking $88 million in discretionary funding for 10,000 new vouchers for this population. In addition to this request, the budget has also proposed $11 billion in mandatory funding for an ambitious new 10-year initiative to end homelessness among families with children. This initiative, which would be exempt from the annual Congressional appropriations process, aims to assist 555,000 families over the coming decade through a significant expansion of housing choice vouchers and rapid rehousing assistance. As I noted in a blog post last year, the reduction in family homelessness has been much smaller than among veterans and chronically homeless individuals. In fact, as of the 2015 Point-in-Time count, which estimates both the sheltered and unsheltered homeless populations on a single night every January, the number of homeless persons in families in shelter is actually 4 percent higher than in 2007.

Emphasis on Economic Mobility and Fostering Inclusive Communities

With increasing evidence that neighborhood quality matters for child development and economic prospects, including a 2015 analysis of HUD’s Moving to Opportunity demonstration program, the President’s budget has requested a $75-million funding increase for Choice Neighborhoods, and has proposed a new three-year $15 million Housing Choice Voucher Mobility Counseling Demonstration program to help HUD-assisted families move and stay in higher-opportunity neighborhoods. In a similar vein, the budget has proposed the Upward Mobility Project, a new place-based initiative that will allow states and localities to blend funding across four existing block grant programs—HHS Social Services Block Grant and Community Services Block Grant, as well as HUD's HOME and CDBG programs—to implement evidence-based policies focused on poverty reduction and neighborhood revitalization. The budget maintains HOME funding at the FY 2016 enacted level of $950 million, which is an encouraging sign for many advocates who had rallied against FY 2016 Congressional proposals calling for severe cutbacks to the program, an important source of gap financing for tax credit projects and other local affordable housing initiatives. The budget also includes a request of $300 million in mandatory funding for a Local Housing Policy Grants program to help localities and regional coalitions fund policies and programs that minimize barriers to housing development and expand housing supply and affordability.

Reflecting the impact of the Supreme Court’s decision regarding low income housing tax credit (LIHTC) allocations in Texas Department of Housing and Community Affairs vs. Inclusive Communities Project and HUD’s Affirmatively Furthering Fair Housing ruling last summer, the President’s FY 2017 budget has also proposed that Qualified Allocation Plans (QAPs) for state housing finance agencies be required to include Affirmatively Furthering Fair Housing (AFFH) as an explicit preference for awarding tax credits. Additionally, part of the $69 million increase requested for the public housing operating fund in FY 2017 would go toward supporting increased PHA administrative expenses associated with implementation of the new AFFH regulations.

Serving the Lowest-Income Households

According to HUD’s 2015 Worst Case Housing Needs report, just 39 affordable units are available for every 100 extremely low-income renter households (those with income no higher than 30 percent of AMI). To incentivize developers seeking tax credits to provide deeper affordability for the lowest-income households—those who often cannot afford to live in LIHTC units without additional rental assistance—the President’s budget has once again proposed an income-averaging rule for LIHTC eligibility in which the average income for a minimum 40 percent of the units in a project does not exceed 60 percent of AMI.

The National Housing Trust Fund would also help address the shortfall in units that are affordable to the lowest-income households. Originally authorized in 2008 under the Housing and Economic Recovery Act, the Housing Trust Fund is a mandatory program funded by GSE contributions that will allocate funding to states and state-designated entities for the development, rehabilitation, and preservation of housing targeted at extremely low-income households. HUD predicts that it will collect $170 million in fee assessments from Fannie Mae and Freddie Mac for the fund in 2016, and an additional $136 million from the GSEs in 2017.

Preserving the Affordable Rental Stock

Despite an expansion of the voucher program, the budget included a $20 million reduction in tenant protection vouchers, which provide critical protection to residents at risk of displacement because they live in HUD-assisted units with expiring or terminating contracts. HUD notes that it will need to provide partial funding to approximately 33,500 vouchers in FY 2017 because the proposed amount of $117 million is insufficient to fund them for a full 12 months. Although HUD plans to request the full amount necessary for these voucher renewals in 2018, there is no guarantee that HUD will receive the funding it needs, putting families living in HUD-assisted units with expiring affordability contracts at risk for rent increases, eviction, or homelessness.

In addition to a requested expansion of the RAD program in order to preserve affordable stock, the President’s budget has also proposed that Section 202 Project Rental Assistance Contracts (PRACs), providing affordable rental housing to adults aged 62 and over, should also be eligible for conversion. While not part of the FY 2017 discretionary funding request, the budget has also recommended adding the preservation of federally assisted affordable housing to the other 10 criteria that state housing finance agencies are required to include in their QAPs for awarding LIHTC allocations.

--

What happens from here? As the Center on Budget and Policy Priorities (CBPP) notes in a recent memo, the House and Senate will likely begin working on their own budget resolutions earlier than usual this year because an agreement is already in place on overall Congressional funding limits for fiscal year 2017. However, final decisions on FY 2017 appropriations will likely occur after the November elections.