There Is No Simple Solution To The Affordable Housing Crisis
Although housing is a basic human need, affordable housing is increasingly difficult to attain for many Americans. Housing is considered “affordable” if it consumes less than 30% of a household’s total income. Nearly half of the 43 million renter households in the U.S. are housing cost-burdened, meaning they spend more than 30% of their income on housing. Severe cost-burdened renters are spending over half of their income on housing.
The lack of adequate affordable housing has a host of negative effects on communities. Housing cost-burdened families experience greater stress relating to food security, health care, retirement, transportation and overall social stability. Also, the lack of affordable housing that is proximate to job centers leads to increased traffic and negative environmental impacts. Among other things, it exacerbates sprawl and creates a lack of diversity in our communities.
The dialogue relating to affordable housing often centers, as it should, around supply. The National Low Income Housing Coalition estimates the shortfall of rental units that are affordable to very low-income households to be 6.8 million units. At our current pace of production — approximately 110,000 units per year — supply will never meet demand.
Low Incomes, Land-Use Regulations And A ‘Not In My Backyard’ Attitude Contribute
So, what causes a shortage of affordable housing in the first place? Local land-use regulations and cost are key factors. In too many communities, local zoning and related laws (such as growth caps or density restrictions) make it hard or impossible to navigate the local landscape and deliver the density needed to make an affordable apartment project work.
Some of this is intentional and driven by NIMBYism, but some of this shortage is incidental, resulting from arcane land-use regulations. The effect is to restrict the creation of more housing, affordable or not. But even if communities were more open to affordable housing, there would not be adequate financial support needed to offset production support to the extent needed to deliver the requisite affordability. There simply are not enough federal affordable housing tax credits and other resources available to meet demand.
What Drives Demand For Affordable Housing?
In addition to focusing on the problem of supply, the affordable housing crisis won’t be solved without attention to demand. Why is it that so many households cannot afford market-rate housing? Why are 20 million (mostly lower-income) renter households housing cost-burdened?
Part of this has to do with the redistribution of wealth and income over the past 40 years or so and the shrinking of the middle class. Today a greater share of the nation’s aggregate income is going to upper-income households, while the share going to middle- and lower-income households is falling. In fact, according to findings from Pew Research, “the share of American adults who live in middle-income households has decreased from 61% in 1971 to 51% in 2019.”
This shift of income (and associated wealth) has effectively reduced the number of households that could otherwise afford market-rate rents and is thereby contributing to the affordable housing problem by increasing demand.
A Real Opportunity To Address Affordable Housing: Local Policy Changes
In addition to federal policy choices — primarily tax policies — that have exacerbated the redistribution of wealth over the past 40 years, local land-use regulations continue to constrain the development of affordable housing. The Biden administration offers significant resources for housing in the 2022 Budget Resolution. Most of this is focused on increasing supply by making more funds available to support the construction and preservation of affordable housing units, both multifamily and single-family homes.
This commitment to affordable housing is significant and will undoubtedly increase supply. But unless the Biden administration can address regressive federal tax policies and other measures to redistribute wealth to the lower and middle classes, the problem of growing demand will persist. Local jurisdictions are vulnerable to vocal minorities who oppose affordable housing. The Biden administration is hoping to address the challenges of local opposition by allocating funds to help communities reform zoning laws to reduce barriers to production.
Still, local politics will not easily yield to the hand of the federal government. NIMBYism is a powerful force that has proven resistant to change and unless the federal government threatens to withhold funding to municipalities putting up roadblocks to development, the story is not likely to change.
What Can Local Business And Political Leaders Do To Address This Problem?
At the local level, business and political leaders are struggling with housing challenges every day. Seasonal businesses must scramble each year to find housing for their employees. In Colorado, for instance, where my organization is based, some summer workers stay in group campsites because of the lack of affordable seasonal housing. At the same time, many year-round employees in higher-cost areas find themselves moving further away from their jobs to find decent affordable housing.
What can local business and political leaders do to help address this growing problem? For starters, they can lead efforts to address local barriers to affordable housing. This would include:
1. Helping local leaders understand that more affordable housing is a benefit to the community. Connecting housing to a community’s economic vitality is not a stretch, but it is a connection not made often enough.
2. Advocating for higher density development.
3. Speaking up when given the chance to publicly support affordable housing efforts.
We know that an adequate supply of housing is an ongoing challenge. Today’s estimates are that there is a shortfall of almost 7 million rental units available for lower-income families and a single-family home supply shortage of roughly 3.8 million units. It is very unlikely that the pace of production will satisfy the demand for affordable rental units, even with the additional resources proposed by the Biden administration. Resistance to the development of affordable housing at the local level will also have to be addressed, which is where individual business leaders need to be involved.
Beyond that, the challenges relating to demand must be considered and addressed through federal policies that reduce the wealth gap and put more income in the hands of prospective renters to help them afford the housing they need.