Shortfalls in the affordable supply

SHORTFALLS IN THE AFFORDABLE SUPPLY Between 1993 and 2013, the number of very low-income house- holds eligible for federal rental housing assistance soared by 3.8 million, bringing the total to 18.5 million. Over this same period, however, the number of assisted renters rose by just 532,000 (Figure 35). As a result, the share of income-qualified renters that received assistance dropped from 29 percent to 26 percent.

With demand far outstripping supply, competition for housing assistance is intense. The waiting lists for housing vouchers managed by local public housing authorities (PHAs) are years long or even closed. According to HUD’s Picture of Subsidized Households, a renter household that used a voucher in 2015 had waited more than two years on average to move into a unit, with the wait time in the San Diego metro area as long as seven years.

The US Treasury Department’s Low Income Housing Tax Credit (LIHTC) program, the primary vehicle for expanding the afford- able housing supply, has supported construction and preserva- tion of roughly 2.8 million rental units since 1986. The tax cred- its are allocated to states on a per capita basis, and applications

Note: The chronically homeless have been without a place to live for at least a year or have had repeated episodes of homelessness over the past few years. Source: JCHS tabulations of HUD, 2015 Annual Homeless Assessment Report to Congress.

30

20

10

0

-10

-20

-30

-40 People in Families

with Children Chronically Homeless

Individuals Veterans

● 2007–2010 ● 2010–2015

Progress in Reducing Family Homelessness Has Been Comparatively Modest Change in Homeless Population (Percent)

FIGURE 34

Notes: Extremely low/very low/low income is defined as up to 30%/31–50%/51–80% of area medians. Cost-burdened households pay more than 30% of income for housing costs. Inadequate units lack complete bathrooms, running water, electricity, or have other serious deficiencies. Source: JCHS tabulations of HUD, 2013 American Housing Survey.

● Not Burdened ● Cost Burdened

14

12

10

8

6

4

2

0

14

12

10

8

6

4

2

0 Extremely Low Very Low Low All Higher Extremely Low Very Low Low All Higher

Income LevelIncome Level

Many Low-Income Households Sacrifice Housing Quality for Affordability Share of Renters Living in Inadequate Units (Percent)

 

FIGURE 33

Share of Owners Living in Inadequate Units (Percent)

 

 

THE STATE OF THE NATION’S HOUSING 201634

for the credits far exceed available funding. By itself, though, the tax credit is insufficient to support development of hous- ing affordable to the nation’s lowest-income households and is therefore often combined with other subsidies, like those under the HOME program. The 55 percent real reduction in HOME funding between FY2006 and FY2016 has thus eroded the power of the LIHTC program to add new affordable rentals.

Faced with shrinking federal resources, state and local govern- ments are attempting to fill the financing gaps. A report by the Technical Assistance Collaborative found that 30 states offered some form of state-funded rental assistance in 2014, with annu- al funding ranging from about $5 million in Delaware to $83 million in Massachusetts. At the local level, cities have turned to a variety of alternative financing methods, such as taxes on real estate transactions, tax-increment financing, and linkage fees on commercial development.

Cities have also adopted or revised their inclusionary housing ordinances, either mandating that a share of units in new hous- ing developments over a certain size be affordable to low- and moderate-income households or offering density bonuses in exchange for setting aside affordable units. According to a 2014 report by the Lincoln Institute of Land Policy, inclusionary hous- ing programs exist in more than 500 local jurisdictions. These programs typically provide long-term affordability, which is important in high-cost areas and in gentrifying neighborhoods where low-income households are at risk of displacement.

But local land use regulations—such as zoning requirements, density and height restrictions, and minimum lot size and park-

ing requirements—can also inhibit construction of affordable housing in expensive metro areas. For example, a 2008 study by Harvard’s Rappaport Institute for Greater Boston found that a one-acre increase in a local town’s minimum lot size was asso- ciated with about a 40 percent drop in housing permits.

High land and wage costs also deter affordable housing devel- opment. A 2015 Urban Land Institute report estimated that in hot housing markets, land costs for a high-rise, mixed-income project with affordable units could account for as much as 25 percent of total development costs. Similarly, the Citizens Housing and Planning Council in New York City estimated that a prevailing wage requirement for affordable housing projects in 2011 could also raise development costs by roughly 25 per- cent. These added costs must be met with either an increase in government subsidies or a reduction in affordable units.

These conditions make preservation of the existing supply of assisted housing all the more urgent. According to the National Housing Preservation Database, the affordable-use restrictions on nearly 2 million federally assisted rental units will expire over the coming decade. A majority (64 percent) of this at- risk stock is supported through the LIHTC program, which is approaching its 30-year anniversary.

On the public housing side, the Rental Assistance Demonstration (RAD) has given PHAs new flexibility to use tax credits and pri- vate capital to rehabilitate and preserve the aging inventory. As of December 2015, HUD estimates that PHAs and their part- ners raised over $1.7 billion through RAD to convert more than 26,000 public housing units to long-term contracts.

Note: Very low income is defined as 50% or less of area median. Source: JCHS tabulations of HUD, Worst Case Housing Needs Reports to Congress.

● Unassisted ● Assisted

20.0

17.5

15.0

12.5

10.0

7.5

5.0

2.5

0 1983 19891987 1993 1995 19971991 1999 2001 20031985 20072005 20112009 2013

After Some Increase in the 1980s, the Number of Assisted Households Has Been Essentially Flat for Two Decades Very Low-Income Renter Households (Millions)

FIGURE 35

 

 

35JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY

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