Community Progress Blog

The REAL rental housing issue

Written by on March 16, 2016
Small multifamily buildings in Springfield, Ma., courtesy of Google Earth, Alan Mallach.

Small multifamily buildings in Springfield, Ma., courtesy of Google Earth, Alan Mallach.

Originally posted on the National Housing Institute’s Rooflines blog

We know a few things about the majority of very low-income renters: They live in private market housing, not tax credit projects or public housing. They receive no housing subsidies. They are paying far more than they can afford for what is too often substandard housing in distressed neighborhoods.

These statistics are well enough known, but we don’t think about them as much as we should, and often lose track of the actual human toll behind them.

A book coming out in March called, simply, Evicted, by Harvard scholar Matthew Desmond, tells that story. It should be required reading for anyone in community development (A paper by Desmond titled “Eviction and the Reproduction of Urban Poverty” addresses some of the same issues as his forthcoming book). It’s a twofold problem: The most fundamental problem is that the economics of what poor people live on–either from public assistance or low-wage jobs–are totally inadequate to afford what it costs to create or provide even minimally decent housing. The 25th percentile rent in the United States–the low-end median rent, where 1/4 of the units rent for less and 3/4 rent for more, was $670/month, which takes an income of $26,800 to afford. Realistically, even the most self-sacrificing landlord can’t pay off a mortgage, pay taxes and maintain a rental unit in decent shape for what a poor family can consistently afford to pay.

The second problem is, of course, that our political system has failed to address this issue in a meaningful way. Instead, we have a sort of lottery, where a lucky few get housing vouchers, and the rest, for the most part, are out in the cold. What happens then? Poor tenants, whose incomes are not only low but highly unpredictable from one month to the next, live almost like refugees in a revolving door existence of substandard housing, dangerous neighborhoods, rent arrears, doubling up, eviction, and forced moves almost on a yearly basis.

Millions of people are evicted each year, and millions more move involuntarily without waiting for a formal eviction proceeding. Without a stable place to call home, these families live in a constant state of social and economic instability, their children moving from school to school, all perpetuating the multigenerational poverty that characterizes so many of our inner city neighborhoods, not to mention frustrating efforts by CDCs and others to build strong, cohesive neighborhood organizations and stable neighborhoods.

The response from the community development field, for the most part, tends to be to try to build tax credit housing. Yet, a recent HUD study has raised some tough questions about what tax credit housing means in this context. Even though tax credit rents are set at what a tenant at 50 percent of the Area Median Income (AMI) can afford, the majority of tenants tend to have much lower incomes–45 percent have incomes below 30 percent of AMI, and another 19 percent between 30 and 40. But, unlike public housing, LIHTC rents are not adjusted to family incomes. This means two things: First, large numbers of LIHTC tenants make ends meet by getting a Section 8 Voucher, and using it to make living there affordable. Although the HUD data is sometimes hard to interpret, it looks like at least 36 percent of all LIHTC tenants have a voucher or some other form of rental assistance. An educated guess is that at least 1 out of every 3 vouchers in circulation is being used in a tax credit project. Second, of LIHTC tenants who do not have a voucher, more than 60 percent are paying over 30 percent of their gross income in rent; in other words, suffering from precisely the cost burden that affordable housing is supposed to prevent. This probably represents a better option for most than private market housing–the quality of housing is likely to be higher, and in high-cost areas, like New Jersey or California, their cost burden, although high, may still be less than it would be on the private market. The point, though, is that LIHTC housing is, in the final analysis, not a solution. What is to be done, then?

If there is one issue that should be the focus of national advocacy efforts, it should be this one. The National Low Income Housing Coalition has done great work, but it is not enough. Rather than simply advocate for more vouchers, we should see this as an opportunity to take a close look at what the best way would be to fill the gap between what poor tenants can afford and what it costs for the private market to provide decent housing–and then try to build a broad coalition around it.

What would be the best way to meet these needs? I don’t know the answer, but it’s critical to ask the question. Over 40 years ago, then-President Nixon proposed a guaranteed annual income for every American family. Would simply putting more money into people’s pockets be a better way of helping them find decent housing, with fewer market distortions than the Section 8 program? Taking the opposite tack, could vouchers become more property– not project–based, with a competitive model where landlords of all stripes could compete for vouchers on the basis of price and quality? I’m sure there are other models worth looking at as well.

In the meantime, difficult as it may be, this is a critical issue for any CDC or other organization trying to build stronger neighborhoods. Tenants in private market housing, most of them low or very low income, make up half or more of the residents of most lower urban neighborhoods. We need to look at how the community development field can help better support tenants in private market housing. We have a fairly decent although patchy network of organizations in this country to help homeowners keep their homes, but nothing that I’m aware of to help renters keep their homes. Changing that is long overdue.

Judith Martin says:
Mar 17, 2016

My friend, Julia (not her real name), lives on one side of a camel-back double near Baronne St. and Jackson Ave. She pays $600.00 rent a month and does not have Section 8. People in the houses (19th century) around her, on both sides of the street, have Section 8, and can pay anywhere between $200.00 to $400.00 a month for rent. Very peculiar.

Kristi Kozubal says:
Mar 17, 2016

This is insane. In my mid-Michigan community today there are 285 properties list for sale on the MLS alone for less than $72,000. At 5% interest over 30 years, with no downpayment, those houses should cost less less than $670 per month INCLUDING property taxes and insurance. And where I live, at least half of those houses are move-in ready in decent neighborhoods. But the people who should be excited about those “affordable” housing prices cannot qualify for traditional bank loans.

This makes me so angry I bought one of those homes last Fall, a $44,100 foreclosure. It’s an adorable 1930’s bungalow that just needed new roofing, paint, utility hook-ups, appliances and bathroom tile. I’ll probably have $11,000-13,000 invested by the time I put it back on the market, and I’ll sell it on Land Contract to someone who can prove to me they have a decent rental or ownership history, a bank account and a job. I probably won’t make more than $4,000-5,000 on it, but I had to do it. Not to make money but simply because I COULD. Everyone who CAN do it SHOULD be doing it. We should all be stepping up to fill this gap. The banks won’t. The Government won’t. The private sector CAN – the the developer types are just too greedy, too big, too lazy or too risk-adverse. Luckily I’m doing it for fun, for the principle, and because I like to paint and tile.

What I’m saying is that it can be done. And it’s not that complicated. Even if it’s one house at a time – let’s do this!

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