housing crisis is most manifest in the gap between household
income and housing costs for many Americans. This problem cuts across all
boundaries: in no city, county, or other jurisdiction in the United States
does a minimum wage job provide enough income for a household to afford
to rent a two-bedroom home at the local fair market rate. This gap is growing:
monthly housing costs grow 5-15 percent annually while the minimum wage
has remained at $5.15 since 1997. In 2003, the national average wage needed
to make the national average rent payment was $14.66—almost triple
the minimum wage.
In the absence of enough affordable units, households pay more money
than they can afford and are constrained from meeting expenses for other
basic needs such as medical care, childcare, and food. High cost burdens
affect 43 percent of all renters, and half of these pay more than 50 percent
of their income for their housing costs. This problem becomes more acute
at the lowest end of the income scale, where there are even fewer dollars
left after the rent check is paid: two-thirds of all extremely low-income
renters (those whose income is below 30 percent of the area median) pay
more than 50 percent of their income for their housing costs. In the US,
30 percent of median income is $16,950.
The problem of substandard housing conditions is the cumulative result
of the huge gaps between housing cost and household income. Families pay
more than they can afford and are paying nowhere near fair market rent,
the price at which standard housing and adequate housing conditions are
expected to be available in their communities. Property owners collect
rents at the level that the market will bear and try to maximize the bottom
line or at least minimize their losses. In a tight market, decent housing
conditions become a scarce commodity that no one thinks they can afford
or expect. One in eight rental households has either moderate or severe
physical problems in its housing unit, and half of these have high cost
burdens and/or are overcrowded as well.
Historically, the federal government has provided rent subsidies, tax
credits, and block grants to increase the availability of affordable housing.
The annual federal investment in housing assistance has never come close
to the subsidy provided to homeowners through federal income tax deductions
for mortgage interest and local property tax payments. In 2001, the mortgage
interest deduction provided a subsidy of $65.8 billion to primarily upper-income
homeowners, more than twice the amount of HUD's entire budget.
Housing units are generally considered affordable if they rent for no
more than 30 percent of household income for a low- or very low-income
household. The federal 30 percent standard of affordability was established
in 1982 (increased from 25 percent, the level created when the notion
“a month’s rent should not exceed a week’s pay”
was the prevailing wisdom).
Federally assisted affordable housing includes subsidized
housing like Section 8 projects, public housing, and units
supported by the Low Income Housing Tax Credit. Although increasingly
rare, some unsubsidized affordable housing units exist in
the private market in some communities. Because this housing
receives no assistance, these units are not income-restricted.
Overall, the availability of affordable housing units is eroding, as
subsidies and nonprofit ownership dwindle, operating agreements expire,
and communities gentrify. Contracts governing more than one million units
will expire in the next couple of years. Between 1997 and 1999, some 200,000
affordable units were lost from the private market alone. For renter households
whose income is below 30 percent of the nation’s median, the shortfall
between the need for affordable housing and supply is two million units.