Posts Tagged ‘Harvard Joint Center for Housing Studies’

Many Americans Spend Half of Their Income on Housing

Wednesday, May 25th, 2011

American renters who pay more than 50 percent of their income on housing has peaked at the highest level in 50 years, according to a report from the Harvard Joint Center for Housing Studies. Approximately 26 percent of renters – that’s more than 10 million people – are spending more than 50 percent of their pre-tax income on rent and utilities because salaries have fallen significantly amid rising rents.  An analysis conducted by the Washington Post found that rents in the nation’s capital, for example, had risen 22 percent in 2009 over the past 10 years.

“It’s a real squeeze for the lower-income and moderate-income families, and we’re even starting to see it affecting middle-income families, too,” according to Erick Belsky, managing director of Harvard’s Joint Center for Housing Studies.  “The prospects for improvement any time soon are dim.”  In other words, finding an affordable house or apartment to rent can be difficult.

When the economy went south in 2008, developers stopped building new apartments at a time when foreclosures were pushing many Americans into the rental market.  Because supply and demand were at odds with each other, rental rates climbed and are expected to remain high for the foreseeable future.  “In real terms, it means more people have less money to spend on household necessities such as food, healthcare, or savings,” Belsky, said.  Households that spend half or more of their income on rent also spend almost 40 percent less on food and more than 50 percent less on healthcare than households with more affordable rent.  “In the last decade, rental housing affordability problems went through the roof,” Belsky said.  “And these affordability problems are marching up the income scale.”

The report notes that – in a perfect world – renters should not have to pay more than 30 percent of their income on housing.  Over the last 10 years, low-income renters have experienced difficulty staying within that limit.  In 2009, 7.5 percent of moderate-income renters had to spend more than 50 percent of their salaries on rent, double the number reported in 2001.

According to the report, 28.6 percent of metropolitan Chicago renters are severely burdened by their rental costs.  Ten years ago, only 20.4 percent of area renters paid that high a percentage of their incomes.

With the number of renters growing, the Low Income Housing Coalition says it’s time for policymakers to put more money into rental assistance and affordable housing.  Throughout the housing crisis and recession, lawmakers have placed resources primarily on helping troubled homeowners avoid foreclosure; but approximately 40 percent of foreclosures also displace renter households.  The coalition has asked Congress to fund the National Housing Trust Fund, which creates a permanent funding source to construct, renovate and preserve 1.5 million units of rental housing for low-income families over the next 10 years.  Although the trust fund legislation passed in 2008, Congress hasn’t funded it because of the economic downturn.  The fund will not increase government spending or taxes because it was designed to be funded through contributions from Fannie Mae, Freddie Mac and the Federal Housing Administration.

Sheila Crowley, the president of the coalition, said now was the time to act.  “Providing $1 billion for the National Housing Trust Fund will help address the growing shortage of affordable housing, which is one of the most serious economic problems facing the country,” she said.  Crowley expects the House of Representatives to begin debating the Section 8 Voucher Reform Act, which passed the House Financial Services Committee last summer.  “We are very much hoping that the Senate will take it up as well,” she said.  The bill would provide rent subsidies for 150,000 low-income families, , and the coalition is seeking another 2 million Section 8 housing vouchers over the next decade, doubling the current number.