- The Federal Housing Finance Agency (FHFA) announced that it plans to expand the Neighborhood Stabilization Initiative into 18 additional Metropolitan areas -the program gives community organizations an “advanced first look” opportunity to purchase foreclosed Fannie Mae and Freddie Mac properties, before they are offered to the general public. This interactive map provides more detail about the 18 Metropolitan areas targeted by the program.
- FHFA has also released it’s Annual Housing Report for the 2014 activities of Fannie Mae & Freddie Mac – in 2014 they acquired $584 billion of loans on single-family owner-occupied housing and provided funding for 738,466 multifamily rental units in 2014.
- U.S. Department of Housing and Urban Development (HUD) releases it’s 50th Anniversary Commemorative Book, in which NYU’s Furman Center Contributes a chapter, Race, Poverty & Federal Rental Housing Policy discussing the key goals of the agency, evaluating its progress and identifying “key tensions running through its work.” In another Chapter, Housing Finance in Retrospective authors Wachter & Acolin trace the impact of HUD on the U.S. market.
Tag Archives: poverty
California Dreamin’ of Affordable Housing
Just A Dream for Many
Yesterday, I blogged about the affordable housing crisis in New York City. Today, I look at a report from the Center on Budget and Policy Priorities, How Housing Vouchers Can Help Address California’s Rental Crisis. It opens,
California’s severe shortage of affordable housing has hit low-income renters particularly hard. Nearly 1.6 million low-income California renter households paid more than half of their income for housing in 2013, and this number has risen 28 percent since 2007. While the shortage is most severe on California’s coast, many families throughout California struggle to pay the rent. A multifaceted approach with roles for local, state, and federal governments is needed to address the severe affordable housing shortage, but the federal Housing Choice Voucher program can play an outsized role.
California’s high housing costs stretch struggling families’ budgets, deepening poverty and hardship and exacerbating a host of other problems. For example, 23 percent of Californians are poor, according to Census measures that take housing costs into account, well above the poverty rate of 16 percent under the official poverty measure. California has 14 percent of the nation’s renter households but nearly 30 percent of the overcrowded renters. And California has one-fifth of the nation’s homeless people, more than any other state. A large body of research shows that poverty, overcrowding, housing instability, and homelessness can impair children’s health and development and undermine their chances of success in school and later in the workforce.
Housing vouchers help some 300,000 low-income California families afford the rent, more than all other state and federal rental assistance programs combined. Vouchers reduce poverty, homelessness, and housing instability. They can also help low-income families — particularly African American and Hispanic families — raise their children in safer, lower-poverty communities and avoid neighborhoods of concentrated poverty. Moreover, so-called “project-based” vouchers can help finance the construction of affordable rental housing in areas with severe shortages.
Yet the number of vouchers in use has fallen in recent years, even as California’s housing affordability problems have worsened. Due to across-the-board federal budget cuts enacted in 2013 (called sequestration), 14,620 fewer California families used vouchers in December 2014 than in December 2012. By restoring funding for these vouchers, Congress can enable thousands more California families to afford safe, stable housing. (1, reference omitted)
Really, the analysis here is not California-specific. The authors are arguing that low-income families benefit greatly from rental subsidies and that Congress should restore funding for housing vouchers because they provide targeted, effective assistance to their users. While California has a high concentration of voucher users, all low-income renter households would benefit from an increase in the number of housing vouchers. No argument there.
I am disappointed that the report does not address an issue that I highlighted yesterday — attractive places like NYC and California continue to draw a range of people from global elites to low-income strivers. Policymakers cannot think of the affordable housing problems in such places as one that can be “fixed.” Rather, it must be seen as, to a large extent, a symptom of success.
So long as more and more people want to live in such places, housing costs will pose a challenge. Housing costs can be mitigated to some extent in hot destinations, but they are hard to solve. And if they are to be solved, those destinations must be willing to increase density to build enough units to house all the people who want to live there.
Wednesday’s Academic Roundup
- Foiled by the Banks? How a Lender’s Decision May Support or Undermine a Jurisdiction’s Environmental Policies that Promote Green Buildings, Darren A. Prum, Michigan Journal of Environmental & Administrative Law, 2015, Forthcoming.
- The Numerus Clausus Principle, Property Customs, and the Emergence of New Property Forms, Yun-chien Chang & Henry E. Smith, Iowa Law Review, Vol. 100, 2015.
- Building Self-Sufficiency for Housing Voucher Recipients: Interim Findings from the Work Rewards Demonstration in New York City, Stephen Nunez, Nandita Verma & Edith Yang, New York: MDRC, June 2015.
- Size Signals Success: Evidence from Real Estate Private Equity, Sebastian Krautz & Franz Fuerst, Journal of Portfolio Management, Vol. 41, No. 5, 2015.
- Debt, Poverty, and Personal ‘Financial Distress’, Stephen J. Ware, 89 American Bankruptcy Law Journal 493 (2015).
- Household Debt and Crises of Confidence, Thomas Hintermaier & Winfried Koeniger, CEPR Discussion Paper No. DP10865.
- Trend-Spotting in the Housing Market, Nikos Askitas, IZA Discussion Paper No. 9427.
- Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class?, James Mills, Raven Molloy & Rebecca Zarutskie, FEDS Working Paper No. FEDGFE2015-84.
- How House Price Dynamics and Credit Constraints Affect the Equity Extraction of Senior Homeowners, Stephanie Moulton, Samuel Dodini, Donald R. Haurin & Maximilian D. Schmeiser, FEDS Working Paper No. FEDGFE2015-70.
- Real Estate Fund Openings and Cannibalization, David H. Downs, Steffen P. Sebastian & Rene-Ojas Woltering.
Neighborhood Change and Public Housing
The Effects of Neighborhood Change on NYCHA Residents, a report released to little notice in May, has received a lot of attention after the NY Daily News wrote a disparaging article about it. I will leave it to others to decide if this report was worth its six figure price tag, but I do think that there are some interesting findings. The report was prepared by Abt Associates and NYU’s Furman Center, two leading housing research entities. The Findings at a Glance state that
In this study, Abt finds statistically significant differences in earnings for NYCHA residents living in different neighborhood types. Annual household earnings average $4,500 higher for public housing residents in persistently high‐income neighborhoods as compared to persistently low‐income neighborhoods. Earnings are $3,000 higher for those in increasing income neighborhoods. Moreover, these findings are not attributable to any selection bias of residents choosing to live in either persistently high or low income neighborhoods. (1)
This is a pretty big deal, given that the average family income for NYCHA residents is $23,311. If this increased income is attributable to neighborhood characteristics, we would want to take that into account when formulating housing policy.
There were some other interesting findings that were also not highlighted by the Daily News:
- Developments surrounded by persistently high‐income neighborhoods have lower violent crime rates (5.7 violent crimes per 1,000 residents) than those surrounded by persistently low‐income neighborhoods (8.3 violent crimes per 1,000 residents).
- Developments in persistently high‐income neighborhoods are zoned for public elementary schools with higher standardized test scores than developments in persistently low‐income neighborhoods; 72% of NYCHA households in low‐income neighborhoods are zoned for schools in the bottom quartile for math proficiency (cf. 41% for those in high‐income neighborhoods).
- Among public elementary and middle school students living in NYCHA housing, those living in developments surrounded by persistently high—and increasing—income neighborhoods score higher on standardized math and reading tests. (Findings at a Glance, 2)
Before this report is dismissed as a boondoggle, we should try to understand its implications for developing a housing policy that promotes socioeconomic diversity. This is a city of extremes of wealth and poverty and there has been a very negative reaction to policies, such as poor doors, that seem to reinforce that state of affairs. But it may turn out that public housing is a useful tool for creating the more equitable city that so many New Yorkers strive for. Let’s not shoot the messengers before we hear what they have to say.
Friday’s Government Reports Roundup
- Authorities partnered with NGOs to create “Community and Supportive Services” Programs (CSS) under the U.S. Department of Housing and Urban Development (HUD)’s Housing Opportunities for People Everywhere (HOPE VI) grants for public housing redevelopment. A study analyzed the programs in Nashville and Atlanta, and found several shortcomings.
- The S. Census Bureau released information from 2014, finding that there was no significant change in median household income or official poverty rate since 2013, but the percentage of people without health insurance decreased.
Housing, Out of Reach
The National Low Income Housing Coalition has released Out of Reach 2015: Low Wages & HIgh Rents Lock Renters Out. The Introduction reads,
Since its founding in 1974 by federal housing policy expert, Cushing Dolbeare, NLIHC has used data to document America’s housing affordability crisis. As part of her original analysis, Cushing observed a fundamental mismatch between the wages people earn and the price of decent housing, what we now call Out of Reach. Today, housing is still out of reach for far too many, and the gap between what people earn and the price of decent housing continues to grow.
The 2015 Housing Wage is $19.35 for a two-bedroom unit, and $15.50 for a one-bedroom unit. The Housing Wage for a two-bedroom unit is more than 2.5 times the federal minimum wage, and $4 more than the estimated average wage of $15.16 earned by renters nationwide. The Housing Wage is an estimate of the full time hourly wage that a household must earn to afford a decent apartment at HUD’s estimated Fair Market Rent (FMR), while spending no more than 30% of income on housing costs. The data in Out of Reach illustrate the gap between wages and rents across the country. In 13 states and D.C. the 2015 Housing Wage is more than $20 per hour.
Many renters earn far less than the Housing Wage in their community and struggle to find an affordable place to live. This edition of Out of Reach highlights some of the economic challenges facing low income renters, including lagging wages, inconsistent job growth, and the rising cost of living. Undoubtedly, the lack of affordable housing remains the overarching problem for low income households, a problem made worse by these economic challenges.
Expanding and preserving the supply of quality, affordable housing is essential to any strategy to end homelessness, poverty, and economic inequality. As our nation’s policymakers seek ways of overcoming these societal ills, access to affordable housing must be a cornerstone of any proposal. (1, emphasis removed)
Some of the particular findings are disturbing. For instance, “There is no state in the U.S. where a minimum wage worker working full time can afford a one-bedroom apartment at the fair market rent.” (1) This state of affairs reflects many trends, including the fact that the minimum wage has not kept pace with inflation and is worth less today than it was a few decades ago. It is worth unpacking this finding a bit.
The report defines “affordability” as costing “no more than 30% of a household’s gross income” for rent and utilities. (2) It defines “Fair Market Rent” as “the 40th percentile of gross rents for typical, non-substandard rental units.” (2) In some ways, this report overstates the affordability crisis because minimum wage workers may be able to afford housing that falls below the 40th percentile of gross rents. Perhaps a better measure would have been to determine how many units are available to the minimum wage workers in that jurisdiction. That being said, the report does document how “rents remain out of reach for many renters.” (2) For instance, 75% of extremely low income renters spend more than 50% of their income on housing costs . . ..” (5)
Income and wealth inequality have reached extreme proportions in America today. This report highlights how this is playing out in the context of the housing market. (I would also note, however, that the report does not account for how restrictive land use policies keep the supply of new housing from growing many communities, but that may just be a subject for another report.)
Housing Affordability Across The Globe
The 11th Annual Demographia International Housing Affordability Survey: 2015 has been released. The survey provides ratings for metropolitan markets in Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the U.K. and the U.S. There are some interesting global trends:
Historically, the Median Multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices from 2.0 to 3.0 times median household incomes. However, in recent decades, house prices have been decoupled from this relationship in a number of markets, such as Vancouver, Sydney, San Francisco, London, Auckland and others. Without exception, these markets have severe land use restrictions (typically “urban containment” policies) that have been associated with higher land prices and in consequence higher house prices (as basic economics would indicate, other things being equal).
Virtually no government administering urban containment policy effectively monitors housing affordability. However, encouraging developments have been implemented at higher levels of government in New Zealand and Florida, and there are signs of potential reform elsewhere. (1-2)
These findings are consistent with Glaeser and Gyourko’s research on U.S. housing markets. Not too many local politicians seem to acknowledge the tension between land use policies that limit residential density on the one hand and housing affordability on the other. The de Blasio Administration in NYC is a refreshing exception to that general rule.
The explicit bias of the Demographia International Housing Affordability Survey “is that domestic public policy should, first and foremost be focused on improving the standard of living and reducing poverty.” (2) Those who favor policies that create more affordable housing should take to heart the call for greater density and less restrictive zoning for residential uses. Otherwise, we are left with subsidy programs that can only help a small percentage of those in need of affordable housing and a lot of empty promises about affordable housing for all. Subsidies have a place in an affordable housing agenda, but so does density.
