Over the past decade, communities across America have seen significant increases in both concentrated poverty (the number of poor people living in high-poverty neighborhoods) and housing insecurity (the number of households paying more than half of their income on housing). At first glance, these might seem like two distinct problems, but in reality the two share a common root cause: lower-income people simply cannot afford a decent place to live in a decent neighborhood.
Consider this: as recently as 2000, the typical renter paid about 24 percent of her monthly income on rent. Today, the typical renter pays more than 30 percent. As a result, 27 percent of households who rent their homes are housing insecure today, compared to just 20 percent in 2000 and 12 percent in 1960.
Over the past several decades, renters have spent an increasing portion of their incomes on housing
There are several factors contributing to this growing rental affordability crisis:
As a result, a growing number of lower-income renters are competing for an increasingly scarce supply of affordable rental homes. According to the Joint Center for Housing Studies, there are currently 18.5 million very low-income renter households in the U.S. – meaning they earn less than 50 percent of the area median income (AMI) – but only 18 million rental units that are affordable at that income level, creating a total gap of half a million units. To make matters worse, about one-third of those “affordable” units are unavailable because they’re occupied by higher-income tenants, while another 7 percent are considered inadequate.
The shortage in supply is even more severe for America’s most vulnerable households. According to the Urban Institute, for every 100 renter households with extremely low-incomes – meaning they earn less than 30 percent of AMI – there are only 28 units that are both adequate and affordable to them. That supply gap has grown substantially in recent years: as recently as 2000 there were 37 affordable and available rental units for every 100 extremely low-income renter households.
America’s lowest-income renters face a significant supply gap
Given these ongoing trends – and barring significant changes to public policy – we expect America’s rental housing crisis to get significantly worse in the coming years. According to projections from Enterprise and the Joint Center for Housing Studies, even if rent growth matches income growth, we estimate that the number of housing insecure renters will increase by about 1.3 million households over the next decade – an increase of over 10 percent – driven mostly by an increase in older households. Due in large part to the aging of the Baby Boom generation, we estimate that more than half of the increase in housing insecurity among renters will be people who are over the age of 65, while roughly a quarter will be over the age of 75. By comparison, today only about 15 percent of housing insecure renters are over the age of 65.
It’s important to keep in mind that these are not just housing issues, but broad social problems. The impacts of living in unaffordable, poor-quality or disconnected housing stretch far beyond the housing market, including:
Further research is necessary to estimate the all-in cost of America’s rental housing crisis. But we are confident that it is costing us hundreds of billions – perhaps even trillions – of dollars each year, especially when you consider all the money spent on treatments for preventable diseases, the countless teacher-hours spent helping students catch up in class, the hours of productivity lost each day because of excessive commutes and the billions in tax revenues lost due to limited access to jobs.
Put another way, we’re left with a choice as a country: we can either invest in affordable housing in strong, inclusive communities now, or we can pay for it in other ways down the line. We can no longer afford to ignore these growing problems. The following chapters lay out our recommendations for bringing this crisis to an end once and for all.
In many ways, residential segregation was the official housing policy of the federal government until the middle of the 20th century. Beginning in the 1930s, the federal government built separate public housing for white and black households – often segregated by neighborhoods – to replace inner-city slums. These segregationist policies were expanded during World War II, when civilian workers moved in droves to inner-cities to take advantage of factory jobs, and again during the post-war boom when much of the country’s massive, high-density public housing projects were erected.
It wasn’t just public housing, though. The Economic Policy Institute’s Richard Rothstein has written extensively about the federal government’s massive investment in so-called “white suburbanization,” including both the creation of the interstate highway system and government-backed loans to develop large white-only subdivisions outside of cities. At the same time, the Federal Housing Administration explicitly refused to insure mortgages to black borrowers or loans in predominantly black neighborhoods, making it much harder for households of color to build intergenerational wealth through homeownership. Certain state and local laws exacerbated the problem, ranging from racially explicit zoning rules to housing covenants that restricted the sale of homes in certain neighborhoods to black families. By the signing of the Fair Housing Act in 1968, much of the damage had already been done, with impoverished and mostly minority inner-cities encircled by affluent, mostly white suburbs.
In many ways, the modern community development movement began as a direct response to these decades of disinvestment from lower-income minority communities. Public policy played a key role in growing the sector. The creation of Community Development Corporations in the late 1960s, the Community Reinvestment Act and the Community Development Block Grant program in the 1970s, the Low-Income Housing Tax Credit program in the 1980s, the Community Development Financial Institution Fund and HOME Investment Partnership program in the 1990s and the New Markets Tax Credit in the early 2000s, all aimed to increase public and private investments in poor, inner-city and mostly minority neighborhoods.