Tag Archives: low-income renters

Comparing Rental Housing Across the Atlantic

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photo by Tiago Fioreze

The Harvard Joint Center for Housing Studies has released a working paper, Rental Housing: An International Comparison. The abstract reads,

This report compares rental housing in 12 countries in Europe and North America, using individual records from household surveys. Differences in housing characteristics, conditions, and costs across countries reflect a number of factors, including demographics, geography, culture, and government policies. A lack of comparable data can make international comparisons difficult to execute, but such analysis is valuable for understanding and contextualizing differences in affordability and other characteristics of renter households and housing.

The analysis revealed the US, along with Spain, as notably unaffordable for renter households, based on a number of measures. The greater apparent cost burdens reflected a variety of factors, including differences in characteristics of the housing stock and differences in tax burdens, as well as measurement problems.

However, two major influences – differences in the size and availability of housing allowances and the degree of income inequality – emerged as the main drivers of differences in housing affordability. The effects of supply-side factors such as the extent of social housing supply, supply subsidies, and rent controls were unclear, due to problems with the identification and description of below-market rentals in the household survey data. (1)

The housing stock and political context is so different among countries, but this type of analysis is still very useful and can offer valuable lessons to the United States:

One factor that appears to contribute to the pervasive affordability problems in the US is the degree of income inequality. That is not a feature of the housing market per se, but there may be opportunities to address the consequences of income inequality through appropriate housing policies.

Other countries have devoted more resources to ameliorating the problems of unaffordable housing. The US provides fairly generous housing benefits to only a small share of needy households. In the UK, a broadly available system of housing allowances offsets what would otherwise be a much more severe affordability problem than exists in the US. In other countries, affordable rental housing supplied by governments or nonprofits helps to address affordability issues, although the efficiency of that practice, relative to the provision of housing allowances, has been questioned, as it has been in the US. The EU-SILC data used in this analysis did not adequately identify or describe below-market-rate housing, making it impossible to adequately assess the effects of such housing.

The somewhat larger size and perhaps higher quality of units in the US rental stock also affects relative affordability, although relative quality and its effect on cost differences are difficult to assess using the available data. The large share of single-family detached rentals in the US reflects preferences, the demographic mix among renters, land availability, etc., but it could also reflect zoning and other regulations limiting the supply of less expensive multifamily rentals. It is hard to imagine that regulations are more stringent in the US than in some of the more dirigiste nations of Europe, but regulations elsewhere may dictate, rather than constrain, density and cost reductions. The size and quality of the housing occupied by low-income renters in the US reflect the fact that most of those units were originally built for owner occupancy or for higher-income renters. That’s probably true in other countries as well. Whether the extent of such filtering is greater or less in various countries is perhaps worth exploring in the future. (37-38)

Income inequality, housing subsidies and land use reform — the report hits on a trifecta of key issues that housing policy should be dealing with. While I do not see much of an appetite for major reform of the first two items in today’s political climate, there might be support for some loosening of land use restrictions on housing construction. I wonder if there is some room for movement on that third front. Can local jurisdictions be incentivized by the federal government to build more housing?

Primer on NYC Affordability Crisis

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"2014 July NYC's 432 Park Avenue" by The Hornet

Enterprise has released a report, 2015 New York City Housing Security Profile and Affordability Housing Gap Analysis. Its conclusions are not shocking, but they are sobering:

  • Of 2 million renter households in New York City, nearly 640,000 are low-income and severely cost-burdened.
  • There is not a single neighborhood in NYC that provides enough affordable housing to match the number of very low-income households in that community.
  • Both the regulated and unregulated rental housing markets of NYC are not meeting the affordable housing needs of low-income renters.
  • Even though the market added rent stabilized units between 2011 and 2014, the stock affordable to lower income families declined.
  • Competition exacerbates the gap between the number affordable units and the number of low-income renters, forcing many to pay beyond their means. (33)

As with many such studies, it offers a cogent analysis of the problem but offers very little by way of possible solutions. It hints at one such solution when it notes that

By any measure, the demand for affordable housing in New York City outstrips supply – even on the rent regulated market. Low-income households are squeezed even further by competition from higher income households for the cheapest units. The acute shortage forces the majority of lower income households in housing that costs beyond their means. (27)

Increasing the supply of housing will, if everything else is equal, reduce the cost of housing. The de Blasio Administration is certainly on board with an approach to increase density in NYC but many other elected officials are not — or at least resist it when it comes to their own backyards.  While more housing is not a sufficient solution to the affordability problem in NYC, it is certainly a necessary component of a solution.

The report also does not deal with the big elephant in the affordable housing policy room — the social demographics of NYC are undergoing a secular shift as the city gets hotter and hotter for global elites. It is unclear how much government can affect that trend, particularly at the local level.

Friday’s Government Reports Roundup

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Nation of Renters

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NYU’s Furman Center and Capital One have produced an interesting graphic, Renting in America’s Largest Cities. The graphic highlights the growing trend of renting in urban communities, but also the increasing expense of doing so. The press release about this study provides some highlights:

  • In 2006, the majority of the population in just five of the largest 11 U.S. cities lived in rental housing; in 2013, that number increased to nine.
  • As demand for rental housing grew faster than available supply, rental vacancy rates declined in all but two of the 11 cities, making it harder to find units for rent.
  • Rents outpaced inflation in almost all of the 11 cities. Rents Increased most in DC, with a 21 percent increase in inflation-adjusted median gross rent, and least in Houston, where rents were stable.
  • In all 11 cities, an overwhelming majority of low-income renters were severely rent-burdened, facing rents and utility costs equal to at least half of their income.
  • Even In the most affordable cities in the study, low-income renters could afford no more than 11 percent of recently available units.
  • In five major cities, including New York, Los Angeles, San Francisco, Boston and Miami, moderate-Income renters could afford less than a third of recently available units in 2013.

Rental housing clearly has an important role to play in providing stable homes for American households, particularly in big cities. While rental housing has been the stepchild of federal housing policy for far too long, it is good that it is finally get some attention and resources.

I look forward to the Furman Center’s follow-up report, which will provide more detail than the graphic does. I am particularly curious about whether the researchers have addressed the difference between housing affordability and location affordability in the longer study. I would guess that the relative affordability of the cities in this study is greatly impacted by households’ transportation costs.