- The Role of Prepayment Penalties in Mortgage Loans, by Andrea Beltratti, Matteo Benetton & Alessandro Gavazza, CEPR Discussion Paper No. DP10504.
- Inclusion by Design, Thinking Beyond a Civil Rights Paradigm, by Robin Paul Malloy, Land Use Law and Disability: Planning and Zoning for Accessible Communities, Cambridge University Press, 2015.
- Cancer Diagnoses and Household Debt Overhang, by Arpit Gupta, Edward R. Morrison, Catherine Fedorenko & Scott D. Ramsey, Columbia Law and Economics Working Paper No. 514.
- Zoning and Land Use Planning: How Real is Gentrification, by Michael Lewyn, 43 Real Est. L.J. 344 (Winter 2014).
- Maximizing Inclusionary Zoning’s Contributions to Both Affordable Housing and Residential Integration, by Tim Iglesias, Washburn Law Journal, Vol. 54, No. 4, 2015.
- Securitization and Mortgage Default, by Ronel Elul, FRB of Philadelphia Working Paper No. 15-15.
- The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities, by Manuel Adelino, W. Scott Frame, & Kristopher Gerardi, FRB Atlanta Working Paper No. 2014-4.
Tag Archives: affordable housing
Tuesday’s Regulatory & Legislative Round-Up
- The Department of Housing and Urban Development Recently Released an Evaluation of the Neighborhood Stabilization Program (NSP) which finds that NSP was too modestly funded to consistently arrest the declines in property values or achieve the impacts that were hoped for.
Housing and Transportation Affordability Index
The Center for Neighborhood Technology has a Housing and Transportation Affordability Index which
provides a more comprehensive way of thinking about the true affordability of place. It presents housing and transportation data as maps, charts and statistics for 917 metropolitan and micropolitan areas—covering 94% of the US population. Costs can be seen from the regional down to the neighborhood level.
The recent focus on combined housing and transportation costs is very useful when planning affordable housing policies as total housing and transportation costs provide a better guide to housing cost burden than housing costs alone.
The Housing and Transportation Affordability Index
shows that transportation costs vary between and within regions depending on neighborhood characteristics:
- People who live in location-efficient neighborhoods—compact, mixed-use, and with convenient access to jobs, services, transit and amenities—tend to have lower transportation costs.
- People who live in location-inefficient places—less dense areas that require automobiles for most trips—are more likely to have higher transportation costs.
The traditional measure of affordability recommends that housing cost no more than 30% of household income. Under this view, a little over half (55%) of US neighborhoods are considered “affordable” for the typical household. However, that benchmark fails to take into account transportation costs, which are typically a household’s second-largest expenditure. The H+T Index offers an expanded view of affordability, one that combines housing and transportation costs and sets the benchmark at no more than 45% of household income.
When transportation costs are factored into the equation, the number of affordable neighborhoods drops to 26%, resulting in a net loss of 59,768 neighborhoods that Americans can truly afford. The key finding from the H+T Index is that household transportation costs are highly correlated with urban environment characteristics, when controlling for household characteristics.
A lot of housing policy rests on the definition of affordability, whether it is that housing cost should be no more than 30% of household income or that housing and transportation costs should be no more than 45% of household income. It would be useful for researchers to take a fresh look at those benchmarks to ensure that they make sense in today’s economy.
Housing Affordability for Moderate-Income Households
The Center for Housing Policy’s most recent issue of Housing Landscape gives its Annual Look at The Housing Affordability Challenges of America’s Working Households. The Center finds that
Overall, 15.2 percent of all U.S. households (17.6 million households) were severely housing cost burdened in 2013. Renters face the biggest affordability challenges. In 2013, 24.3 percent of all renter households were severely burdened compared to 10.0 percent of all owner households. (1, footnote omitted)
The Center summarizes “the severe housing cost burdens of low- and moderate-income working households.” (1) Unsurprisingly. these households face
significantly greater affordability challenges than the overall population. In 2013,21.2 percent of working households were severely cost burdened (9.6 million households).Twenty-five percent of working renters and 17.1 percent of working homeowners paid more than half of their incomes for housing that year. (1)
The report notes some modest good news:
Since 2010,the overall share of working households with a severe housing cost burden has fallen.This modest decline is the result of a complex combination of factors, including the shift of some higher-income households from homeownership into rental housing. An insufficient supply of rental housing and sustained increases in rents have led to millions of working households having to pay too much for housing or live far from their jobs, in substandard housing,or in poor-quality neighborhoods. (1)
Federal and local housing policy has not yet come to grips with the fact low- and moderate-income households have been paying a significant portion of their income in housing costs year after year. Household have to make difficult trade-offs among cost, distance from employment, housing quality and neighborhood quality.
The Center notes that more can be done to support affordable housing at the federal and state levels, but it is not clear to me that there are any politically feasible policy responses that can make a serious dent in the affordability of housing for working households.
Affordable Housing for which Low-Income Households?
The National Low Income Housing Coalition’s latest issue of Housing Spotlight provides its annual examination of “the availability of rental housing affordable to” extremely low income “and low income renter households . . ..” (1) It finds that
the gap between the number of ELI households and the number of rental homes that are both affordable and available to them has grown dramatically since the foreclosure crisis and recession. Despite this growing need, most new rental units being built are only affordable to households with incomes above 50% of AMI. At the same time, the existing stock of federally subsidized housing is shrinking through demolition and contract expirations, and waiting lists for housing assistance remain years long in many communities. Federal housing assistance is so limited that just one out of every four eligible households receives it. (1, emphasis in the original)
The article, “Affordable Housing is Nowhere to be Found for Millions,” describes the role of the National Housing Trust Fund, signed into law by the Housing and Economic Recovery Act of 2008, but only recently funded by Fannie Mae and Freddie Mac:
The NHTF is structured as a block grant to states, and at least 90% of all funding will be used to produce, preserve, rehabilitate and operate rental housing. Further, 75% of rental housing funding must benefit ELI. The funding of the NHTF will make a difference in the lives of many ELI renters by supporting the development and preservation of housing affordable to this income group. However, additional funding to the NHTF will be necessary to assure support to all income eligible households in need of housing. (1, footnote omitted)
The NLIHC’s key findings from this work include,
- The number of ELI renter households rose from 9.6 million in 2009 to 10.3 million in 2013 and they made up 24% of all renter households in 2013.
- There was a shortage of 7.1 million affordable rental units available to ELI renter households in 2013. Another way to express this gap is that there were just 31 affordable and available units per 100 ELI renter households. The data show no change from the analysis a year ago.
- For the 4.1 million renter households DLI renter households in 2013, there was a shortage of 3.4 million affordable rental units available to them. There were just 17 affordable and available units per 100 DLI renter households.
- Seventy-five percent of ELI renter households spent more than half of their income on rent and utilities; 90% of DLI renter households spent more than half of their income for rent and utilities.
- In every state, at least 60% of ELI renters paid more than half of their income on rent and utilities. (1)
Given that housing affordability remained a problem during both boom times and bust and given that we should not expect another dramatic expansion of federal subsidies for rental housing, now might be a good time to ask what we can reasonably expect from the Housing Trust Fund. Should it be spread wide and thin, helping many a bit, or narrow and deep, helping a few a lot? No right answers here.
Housing out of Thin Air
NYU’s Furman Center has posted a policy brief, Creating Affordable Housing out of Thin Air: The Economics of Mandatory Inclusionary Zoning in New York City. It opens,
In May 2014, New York City’s new mayor released an ambitious housing agenda that set forth a multi-pronged, ten-year plan to build or preserve 200,000 units of affordable housing. One of the most talked-about initiatives in the plan was encapsulated in its statement, “In future re-zonings that unlock substantial new housing capacity, the city must require, not simply encourage, the production of affordable housing in order to ensure balanced growth, fair housing opportunity, and diverse neighborhoods.” In other words, the city intends to combine upzoning with mandatory inclusionary zoning in order to increase the supply of affordable housing and promote economic diversity. (1)
Inclusionary zoning, “using land use regulation to link development of market-rate housing units to the creation of affordable housing,” is seen by many as a low-cost policy to support a broader affordable housing approach. (2) There is a limit to the reach of such a program because developers will only build if the overall project pencils out, including any units of mandatory inclusionary zoning.
The policy brief’s conclusions are important:
In many neighborhoods, including some that the city has already targeted for the new program, market rents are too low to justify new mid- and high-rise construction, so additional density would offer no immediate value to developers that could be used to cross-subsidize affordable units. In these areas, inclusionary zoning will need to rely on direct city subsidy for the time being if it is to generate any new units at all regardless of the income level they serve.
Where high rents make additional density valuable, there is capacity to cross-subsidize new affordable units without direct subsidy, but the development of a workable inclusionary zoning policy will be complex. The amount of affordable housing the city could require without dampening the rate of new construction or relying on developers to accept lower financial returns or landowners to be willing to sell at lower prices will vary widely depending on a neighborhood’s market rent, the magnitude of the upzoning, and, to a lesser extent, on the level of affordability required in the rent-restricted units. Where developers must provide the required affordable housing, and whether they can instead pay a fee directly to the city, also bears heavily on the number of affordable units a mandatory inclusionary zoning policy has the potential to generate, but raises other difficult issues. (14-15)
The de Blasio Administration’s housing and land use team is very sophisticated (including the Furman Center’s former director, Vicki Been, now Commissioner at the Department of Housing Preservation and Development), so the City will be well aware of these constraints on a mandatory inclusionary housing program. Nonetheless, it will be of great importance to design a flexible program that can adapt to changing market conditions to ensure that such a program is actually a spur to new development and not merely a well-intentioned initiative.
Friday’s Government Reports Roundup
- CFPB releases report of KPMG audit of its operations and budget. In the report, CFPB agrees with KPMG’s findings about control deficiencies and is aiming to fix such deficiencies.
- FHFA releases report on progress of Fannie/Freddie Conservatorships in advancing access to credit and loss mitigation/foreclosure prevention, among other improvements.
- Report from NYC Department of Investigation raises concerns for health and safety of those in homeless shelters.
- Report from the National Low Income Housing Coalition (NLIHC) claims: “Affordable Housing is Nowhere to be Found for Millions.
