PUBLISHED: June 19, 2018 at 1:00 pm
UPDATED: June 19, 2018 at 2:51 pm
With incomes falling woefully behind galloping rents and home prices, more and more Americans are “cost burdened” — that is, paying more than the recommended 30 percent of their earnings on housing.
And unless the federal government takes action, millions of Americans will face the specter of “housing instability.”
Those were among the findings of a new Harvard report on the “State of the Nation’s Housing.” The Harvard Joint Center for Housing Studies released its 30th-anniversary edition Tuesday, June 19.
“The federal government’s failure to respond adequately to this large and growing challenge puts millions of households at risk of housing instability,” the report concluded. “A more robust federal response is essential to any meaningful progress in combating the nation’s housing affordability crisis.”
Almost a third of U.S. households — 38 million — were cost burdened in 2016, up from 31.5 million in 2001. And almost half of all renters — 21 million — were cost burdened in 2016.
That’s a dramatic change from a half-century ago.
In the 1960’s, 24 percent of renters were cost-burdened, vs. 48 percent in 2016.
That’s because housing costs have soared, even after adjusting for inflation, while incomes failed to keep up. For example:
- The median U.S. rent rose 61 percent between 1960 and 2016 in inflation-adjusted dollars. Median tenant income grew a mere 5 percent.
- The median home value increased 112 percent in that same period, while median homeowner income increased 50 percent.
“Median renter income, when adjusted for inflation, has barely budged since 1960,” Harvard Joint Center Managing Director Chris Herbert said last week. “So when you talk about housing affordability, it’s an income problem and a housing problem. And the question is, how do we bring down that housing cost curve?”
Additionally, 10 percent of homeowners and a fourth of all renters are “severely” cost burdened, meaning they spend at least half of their earnings on monthly housing costs, U.S. Census figures contained in the report show.
Severely cost-burdened families spend an average of $500 a month on food, less than $100 on transportation and under $30 on healthcare, the report said.
Meanwhile, federal rental assistance failed to keep up with the increasing numbers who qualify for such help. From 1987 to 2016, the number of very low-income renters (those typically eligible for subsidies) grew by 6 million, while the number getting assistance rose by less than 1 million.
Rather than expand rental assistance, the Trump administration is seeking to curtail it further. U.S. Housing and Urban Development Secretary Ben Carson in April proposed raising the rent recipients pay to 35 percent of their gross income from the current 30 percent — essentially making all rental assistance recipients cost burdened.
Seventeen percent of HUD-assisted households and 31 percent of those getting Section 8 rent vouchers already are cost burdened because rents set by the agency have failed to keep pace with actual rents landlords are charging, the Harvard report said.
Homeownership has been hampered as well due to the lack of affordable housing — particularly among young adults and African Americans.
U.S. homeownership rates, which had been falling since the 2007 housing crash, appear to have stabilized at 64 percent.
But homeownership rates for young adults and for black households are at 30-year lows, the report said. The black-white gap in homeownership rates widened to 29 percentage points, up from 23 percentage points in 1983.
“Does this matter for wealth? Absolutely,” Herbert said last week at the National Association of Real Estate Editors conference in Las Vegas. “It’s time to reassess whether or how we should address programs to support homeownership.”
The report also concluded that immigration is becoming the main driver of household growth.
Foreign-born residents — who accounted for 15 percent of new households in the 1980s — now account for almost half of new households so far this decade.
“Immigration is going to account for an ever-larger share of population growth and, therefore, household growth as well,” Herbert said.
Meanwhile, the report noted homelessness increased last year to 554,000 people living in shelters or on the streets. About 1.4 million people used a shelter at some point in 2016.
Housing costs are a component in homelessness, the report said: Fifty-six percent of the homeless population lives in the nation’s highest-cost metro areas.
“There’s a very strong correlation between levels of rent and the population of homeless,” Herbert told the real estate editors conference. “It’s absolutely linked.”
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