December 16, 2008

SOME FACTS ABOUT ASSISTED HOUSING

President-elect Obama has named his choice for housing secretary. In our search for non-mushy information about Shaun Donovan we were reminded of the difficulty of getting non-mushy information about assisted housing in general. Through some combination of culture and convenience, we are left with extraordinarily complex but not necessarily helpful data while at the same time without answers to some simple and direct questions such as how are we doing with assisted housing compared, say, with ten years ago? The following is a rare exception. Please bear in mind that it was published before the current housing crisis. Low Income Housing Coalition, 2006 - Federal housing assistance budget authority has declined nearly 50% since its peak in 1978. Public housing, Section 8 project-based rental assistance, and programs for the elderly and disabled, all of which tend to serve very low income households with incomes of 50% or less of [the area median income] have all faced budget cuts and uncertainty in recent years. Since the 1980s, funding for these programs has for the most part maintained existing buildings and contracts. At the same time, the very low income renter population has grown from 10.7 million households in 1978 to 16.3 million in 2005, due in part to the growth of the U.S. population in general but also as a result of stagnating or declining wages and benefits over this period. As a result, the number of “worst case needs” households, very low income unassisted renters paying half or more their income for housing or living in severely substandard housing, has persisted and grown throughout the subsequent decades, rising from 4 million households in 1978 to 6 million households in 2005. Increasingly, the focus at the federal level has been on moving people into homeownership and on shifting resources to programs that serve households at higher rungs on the income ladder. For example, the Low Income Housing Tax Credit has emerged as the most significant federal program producing affordable housing for low income Americans. Yet more than 60% of the units funded in 2005 were targeted at households with 50% [area median income] or above. Whether it was the desired or unintended result of policy , one de facto result of this declining federal commitment to housing the lowest income households has been the steady devolution of the responsibility for rental housing assistance to lower levels of government. Unfortunately, states have not been able to close the gap left by the federal government. Low Income Housing Coalition, 2006 - In 2005, the federal government spent just over $39 billion on housing assistance for low income Americans. This figure is expected to be 19% lower in 2011, if plans to trim housing assistance are fully implemented. Yet, the federal government also paid $121 billion in tax expenditures in 2005 - more than three times the amount spent on housing assistance - to subsidize homeownership through mortgage interest, capital gains, and property tax deductions. These deductions disproportionately serve the homeowners with the highest incomes. When both housing assistance and tax benefits are taken into account, the poorest one-fifth of American households - those earning less than $19,000 per year - will receive approximately $34 billion in housing subsidies in 2006. By way of contrast, the richest fifth of American households (those earning over $92,000) will receive approximately $94 billion in subsidies, nearly three times more than the poorest fifth and accounting for roughly half of all housing subsidies distributed in 2006. In 2003, there were nearly two million fewer rental units affordable at 30% of the area median income, the top threshold for what HUD defines as extremely low income, than there were renter households in this income category. This absolute shortage of apartments affordable to the lowest income Americans increased by more than 200,000 between 2001 and 2003. Because many units affordable to these households were occupied by households with higher incomes and therefore were not available to meet the housing needs of [extremely low income] households, the effective shortfall is actually closer to five million units nationwide. In 2003 there were just 42 units of housing that are were both available for and affordable for to every 100 ELI renter households in America. When the demand for affordable housing exceeds the supply, low income households have no choice but to live in unaffordable units. In 2003, 5.18 million households - nearly 5% of all U.S. households - with incomes below 50% of their area's median were unassisted renters living in severely unaffordable and/or inadequate housing. The average ELI household spent 79% of its income on housing costs in 2005. In the same year, roughly three-quarters of the 6.3 million ELI renter households spent more than half of their monthly income on housing costs. Today, an individual working full-time, 40 hours a week 52 weeks a year, at the locally prevailing minimum wage cannot earn enough to afford the fair market rent of a one-bedroom apartment in any county in the U.S. On a national basis, a person needs to earn a housing wage of $16.31 an hour, working 40 hours per week, 52 weeks per year, to afford a two-bedroom apartment at the fair market rent. The estimated average wage of American renters was $12.64 in 2005. Roughly 86% of metropolitan renters today live in areas where working 40 hours per week, 52 weeks per year at the mean renter wage is insufficient to cover the cost of a two-bedroom apartment at the fair market rent.

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