Tag Archives: household

Wednesday’s Academic Roundup

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Housing Affordability in NYC

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Jacob Riis, Lodgers in a Crowded Bayard Street Tenement

The Citizens Budget Commission has released Whose Burden Is It Anyway? Housing Affordability in New York City by Household Characteristics. The CBC produced some interesting and counterintuitive policy briefs last year, in which it

examined housing affordability across large U.S. cities to assess New York’s situation in a broader context. Using federal data sources, CBC found that while many New Yorkers face high rents, and the share of households who are “rent burdened” (paying more than 30 percent of income toward rent) grew between 2000 and 2012, the city ranks near the middle among 22 large cities in the share of rent-burdened households. A second analysis revealed New York has the lowest transportation costs among the 22 cities studied due to the large proportion of residents who commute via mass transit. When housing and transportation costs are combined, the city rises from 13th to 3rd place in affordability. The average New York household pays 32 percent of its income towards housing and transportation costs, well within the U.S. Department of Housing and Urban Development’s (HUD’s) affordability guideline of 45 percent. CBC also examined how some “typical” households (as defined by HUD) fared in terms of housing and transportation costs in the same group of cities. In this analysis, low income households in New York also ranked relatively well despite facing serious rent burdens. (1)

The current CBC report looks at NYC rent burdens in greater detail. Key findings include,

  • Forty-two percent of New York City’s renter households are “rent burdened;” that is, adjusting for actual rent paid by each household (“out-of-pocket contract rent” plus utility costs) and food stamp benefits, they pay more than 30 percent of income in rent. „
  • Half of rent burdened households are severely rent burdened, paying more than 50 percent of income in rent. Ninety-four percent of these severely rent-burdened households are low income. „
  • Low-income severely burdened households are disproportionately comprised of singles and seniors. They are also disproportionately households with children and located in the outer boroughs. (2)

CBC adjusts rent to take into account subsidies and familial support. Some will disagree with adjustments of this type, but I think it is a pretty reasonable approach. When combined with the adjustments it made for transportation costs, CBC has produced a textured portrait of the state of housing affordability in NYC.

Home and Marriage

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The Pug Father

TheStreet.com quoted me in First-Time Homebuyers Often Wait to Buy House After Marriage. It reads, in part,

The number of people purchasing their first home, especially Millennials, could be impacted negatively by shifting demographics as the median age for marriage is rising.

A recent survey by NeighborWorks America, the Washington, D.C.-based affordable housing organization, found that 43% the respondents said they intended to buy a home when they “got married or moved in with a life partner.” The median age for a first marriage has risen to 29.3 years old for men and 27 years old for women, according to the U.S. Census Bureau. In 2000, men first got married at 26.8 years old while the median age for women was 25.1 years old.

Other respondents said they would wait to buy a home when other changes occurred, with 22% who will purchase one when they have children and 18% who are still seeking their first full-time job.

Many Millennials are delaying the purchase of a home because not only are they waiting until they are older to get married, a large percentage are also saddled with a large amount of student loans. The survey also demonstrated that 57% respondents admitted that student loans were either “very much” or “somewhat” of an obstacle, a rising concern compared to 49% who expressed this sentiment in 2014.

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“The state of the economy has interfered with their ability to maintain a steady income and this has likely delayed marriage,” said David Reiss, a law professor at Brooklyn Law School. “As a result, they are less likely to become homeowners.”

What’s more, the lack of job security in the current economy has dampened many people’s enthusiasm to own a home.

“Buying a home is a big commitment to your future self and your family: ‘I will make that mortgage payment come hell or high water,’” he said. “Fewer people are going to want to make that commitment if the job market does not give them a reasonable basis to believe that they can live up to it.”

Severely Cost-Burdened Renters

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Geoff Stearns

Enterprise Community Partners and the Joint Center for Housing Studies of Harvard University have issued a report, Projecting Trends in Severely Cost-Burdened Renters: 2015-2025. The report opens,

At last measure in 2013, over one in four renters, or 11.2 million renter households, were severely burdened by rents that took up over half their incomes. This total represented a slight reduction from the record level of 11.3 million set in 2011, but remains dramatically higher than the start of the last decade, having risen by more than 3 million since 2000. With substantial growth in renter households expected over the next decade and little sign of a turnaround in the income and rent trends that produced these record levels of cost burdens, there is little prospect for substantial improvement in these conditions over the coming decade. (4)

And it concludes,

Overall, our analysis projects a fairly bleak picture of severe renter burdens across the U.S. for the coming decade. Under nearly all of the scenarios performed, we found that the renter affordability crisis will continue to worsen without intervention. According to our projections, annual income growth would need to exceed annual rent growth by 1 percent in order to reduce the number of severely burdened renters in 10 years. Importantly, that decline would have a net impact on fewer than 200,000 households, only because continued increases in burdens among minorities would be offset by declines among whites. Under the more likely scenario that rents will continue to outpace incomes, the number of severely rent-burdened households would increase by a range of 1.7 – 3 million, depending on the magnitude.

Given these findings, it is critical for policymakers at all levels of government to prioritize the preservation and development of affordable rental housing. Even if the economy continues its slow recovery and income growth improves, there are simply not enough quality, affordable rental units to house the millions of households paying over half their income in rental costs. (16)

It is unsurprising that the policy takeaway of these two housing organizations is to prioritize the preservation and development of affordable housing. But given the pervasive nature of the problem, I wonder if it is better to just say that this is an income inequality problem and address the root cause — low-income families just don’t have enough money to make ends meet.

The Housing/Income Affordability Gap

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We need affordable housing

The Urban Institute has issued a policy brief, The Housing Affordability Gap for Extremely Low-Income Renters in 2013. The brief opens,

Since 2000, rents have risen while the number of renters who need low-priced housing has increased. These two pressures make finding affordable housing even tougher for very poor households in America. Nationwide, only 28 adequate and affordable units are available for every 100 renter households with incomes at or below 30 percent of the area median income. Not a single county in the United States has enough affordable housing for all its extremely low-income (ELI) renters. The number of affordable rental homes for every 100 ELI renters ranges from 7 in Osceola County, Florida, to 76 in Worcester County, Maryland.

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This brief is the first publication on housing affordability to combine detailed county-level data on ELI renter households (those with incomes at or below 30 percent of the area median) and the impact of US Department of Housing and Urban Development (HUD) rental assistance. Its four key findings:

  • Supply is not keeping up with demand. Between 2000 and 2013, the number of ELI renter households increased 38 percent, from 8.2 million to 11.3 million. At the same time, the supply of adequate, affordable, and available rental homes for these households increased only 7 percent, from 3.0 million to 3.2 million.
  • The gap between ELI renter households and suitable units is widening over time. From 2000 to 2013, the number of adequate, affordable, and available rental units for every 100 ELI renter households nationwide declined from 37 to 28.
  • Extremely low-income renters increasingly depend on HUD programs for housing. More than 80 percent of adequate, affordable, and available homes for ELI renter households are HUD-assisted, up from 57 percent in 2000.
  • The supply of adequate, affordable, and available units varies widely across the country. Among the 100 largest US counties, Suffolk County, which includes Boston, comes closest to meeting its area’s need, with 51 units per 100 ELI renter households.Denton County, part of the Dallas-Ft. Worth metropolitan area, has the largest housing gap,with only 8 units per 100 ELI renters. Rust Belt areas (e.g., Detroit, MI; Chicago,IL, and Milwaukee, WI) have seen large declines in adequate, affordable, and available units. Most counties had fewer units available in 2013 than 2000. Notable exceptions to this trend include Suffolk, MA; Los Angeles, CA; and Miami, FL, which have expanded their number of available units since 2000. (1-2, footnote omitted)

The brief concludes, “Simply put, virtually no affordable housing units would be available to ELI households absent the continued investment in federally assisted rental housing.” (14)

This is an affordable housing story, but it is just as much an income story — low-income households are getting left behind in the race between rising income and expenses. One solution is to expand housing assistance for low-income families. Another is to increase income, one way or another. The bottom line, though, is that low-income households don’t have enough to make a go of it in these United States.

The State of the Nation’s Sustainable Housing

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Harvard University Widener Library

The Joint Center for Housing Studies of Harvard University released its The State of the Nation’s Housing 2015 report. I typically focus on the discussion of the mortgage market in this excellent annual report.  Here are some of the mortgage highlights:

  • mortgage delinquency rates nationwide have fallen by half since the foreclosure crisis peaked. But the remaining loans that are seriously delinquent (90 or more days past due or in foreclosure) are concentrated in relatively few neighborhoods; (6)
  • According to CoreLogic, 10.8 percent of homeowners with mortgages were still underwater on their loans in the fourth quarter of 2014; (8)
  • Despite rising prices, homebuying in most parts of the country remained more affordable in 2014 than at any time in the previous two decades except right after the housing crash. In 110 of the 113 largest metros for which at least 20 years of price data are available, payment-to-income ratios for the median-priced home were still below long-run averages. And in nearly a third of these metros, ratios were 20 percent or more below those averages. (22)

The Joint Center believes that “Looser mortgage lending criteria would help. Given that a substantial majority of US households desire to own homes, the challenge is not whether they have the will to become homeowners but whether they will have the means.” (6) I am not sure what to make of that statement.  It seems to me that the right question is whether looser mortgage lending criteria would result in long-term housing tenure for new homeowners. In other words, looser mortgage lending criteria that result in future defaults and foreclosures are of no benefit to potential homebuyers. Too few commentators tie mortgage availability to mortgage sustainability. The Joint Center should take a lead role in making that connection.

One last comment, a repetition from my past discussions of Joint Center reports. The State of the Nation’s Housing acknowledges sources of funding for the report but does not directly identify the members of its Policy Advisory Board, which provides “principal funding” for it along with the Ford Foundation. (front matter) The Board includes companies such as Fannie Mae and Freddie Mac which are directly discussed in the report. In the spirit of transparency, the Joint Center should identify all of its funders in the State of the Nation’s Housing report itself. Mainstream journalists would undoubtedly do this. I see no reason why an academic center should not.

Homeowners Heading to Pottersville?

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Lionel_Barrymore_as_Mr._Potter

Mr. Potter from It’s A Wonderful Life

The Urban Institute has issued a report, Headship and Homeownership: What Does The Future Hold? The report opens,

Homeownership rates averaged around 64 percent until about 1990, when they began to climb dramatically, reaching 67.3 percent in 2006. The housing crisis that began in 2007 and the ensuing recession, from which the US economy is recovering slowly, resulted in a fall in the homeownership rate to 63.6 percent, according to the latest ACS numbers. Such a trajectory has generated important questions about the future of homeownership at all ages. The issues with young adults seem particularly acute. Will young adults want to own houses? Even if they do, will they be able to afford homeownership? The answers to these questions are still unclear, especially because millennials are not just slower to start their own households and purchase homes: they also are more likely to live in their parents’ homes than any generation in recent history. The rapidly changing racial and ethnic composition of the population also has profound implications for household formation and homeownership.

In this report, we dive deeply into the pace of household formation and homeownership attainment—nationally and by age groups and race/ethnicity over the past quarter-century—and project future trends. Considering the great uncertainty about household formation and homeownership, single-point forecasts of homeownership rates and housing demand could seriously mislead policymakers and obscure the potential implications of their decisions. Instead, we offer plausible competing scenarios for household formation and homeownership that generate a range of future national housing demand projections. (1)

I am not in a position to evaluate how well the report projects future trends, but some of its conclusions are worth considering together:

  • the homeownership rate will decline from 65.1 percent in 2010 to 61.3 percent in 2030; (46)
  • the rapid growth of the renter population will create significant demand for new rental housing construction and encourage shifting of owner-occupied dwellings to rentals; (47)
  • very tight credit availability standards will retard homeownership attainment and may exacerbate the growing shortage in rental housing; (48) and
  • the erosion of black homeownership needs to be addressed by more than mortgage policy. (48)

Taken together, these conclusions all point to a backsliding in the housing market: the American Dream disappearing for millions of Americans, particularly African Americans, who will end up living in overcrowded Pottersvilles straight out of It’s A Wonderful Life. Just like George Bailey, we have choices to make before that nightmare becomes a reality. But before we decide anything too hastily, we should consider the fundamental goals of housing policy.

I have argued that a “fundamental goal of housing policy is to assist Americans to live in a safe, well-maintained and affordable housing unit.” I am less convinced than most housing scholars that homeownership, given the state of today’s economy, is such a sure road to stable housing and financial well-being. So, instead of blindly focusing on increasing the homeownership rate, I would focus on increasing opportunities for sustainable homeownership. I believe the report’s authors would agree with this, but I think that housing scholars in general need to focus on policies that keep households in their housing, given how much income instability they now face.