A Snapshot of Worst Case Housing Needs in 2005

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There are nearly 34 million renter households in the United States. According to the latest assessment by HUD’s Office of Policy Development and Research, 11.52 million renter households receive no housing assistance and are very-low-income households, meaning they make less than 50 percent of the area median income (AMI). More than half (5.99 million) have worst case housing needs.

Worst case needs households have incomes below 50 percent of AMI, receive no rental assistance, and live in units that rent for more than 50 percent of the household’s income and/or are in severely inadequate condition. In addition, 77 percent of these are extremely-low-income households, reporting incomes of less than 30 percent of AMI. Worst case needs households are found in every region, and all metropolitan area types: central cities, suburbs, and nonmetropolitan areas (rural). The extremely-low-income households have incomes that average $648 per month and pay rents that average $647 a month. The number of worst case needs renters grew by 16 percent between 2003 and 2005, and they currently make up 5.5 percent of all American households.

According to Affordable Housing Needs 2005: Report to Congress, the largest and fastest growing component of these households with worst case needs is families with children under 18 (2.32 million). An estimated 39 percent of these families have the equivalent of full-time employment. Elderly households (1.29 million) make up 22 percent of renters with worst case needs. The balance is comprised of renters who neither are elderly nor have children in the household. This group includes singles or nonfamily households, families headed by a disabled person, and other types of families generally consisting of related persons without children.

Supply Issues

At lower incomes, the pool of affordable rental units shrinks and the available housing choices are limited for worst case needs households. In 2005, 77 rental units were affordable and available for every 100 very-low-income renter households. This decrease from an 81:100 ratio in 2003 points to a tighter market for low-rent units. Physical inadequacy further reduced the number of units available to very-low-income renters to 68 per 100. At the same time, average monthly income for extremely-low-income worst case needs renters fell by 3.7 percent and the average gross rent rose by 6.6 percent. Without available and affordable housing, a substantial number of these households make special housing arrangements that include a place to live in exchange for work or as in-kind assistance from families or charities.

The shortage of units is made more pronounced by households with higher incomes living in rental units affordable to those with less income. The table at the left shows the affordability and availability of rental housing for extremely-low-income and very-low-income households. Relative to the AMI at which they are affordable, rental units are often occupied by higher income households. Most vacant units become available at rents affordable only to those earning above 40 percent of AMI, further illustrating the gravity of the problem.

Affordable Housing Needs 2005: Report to Congress concludes that available rental units are progressively harder to obtain at lower income levels. The increased number of worst case needs households; a shortage of affordable, available, and adequate units; and average rents that rose faster than average incomes combine to intensify demand. This situation can be seen in most local communities today, as epitomized by the experience of Baltimore, Maryland, which is described in the Urban Institute’s 2005 analysis of low-end rental housing in that city:

“There are about two poor renters for every affordable housing unit in the city, and more than 16,000 households are on the waiting list for assisted housing. Nearly half of renter households with children are paying more than 30 percent of their income for rent, yet more than 40 percent are living in physically inadequate housing. More than one-third of the rental stock in Baltimore does not meet basic housing codes of physical adequacy.” ¹

Almost 6 million low-income renters have worst case housing needs, including severe rent burdens and inadequate housing.

Estimates of worst case needs help illuminate the scope of the problem, but whether increasing public rental subsidies is the best way to help families secure decent, affordable housing is less clear. Other ways to respond to this challenge include stimulating the housing supply by constructing new subsidized housing (perhaps through the Low Income Housing Tax Credit program), subsidizing housing with vouchers, eliminating local regulatory barriers to housing development, and enhancing the earning potential and job opportunities available to very-low-income households.

Affordable Housing Needs 2005: Report to Congress can be found at www.huduser.org/publications/affhsg/affhsgneeds.html. Previous HUD reports on worst case rental housing needs are located at www.huduser.org/publications/affhsg/rha_main.html. These reports are available to either download for free or to order for a nominal fee from HUD USER by calling 800.245.2691 and selecting option 1. The Urban Institute’s report on low-end rental housing in Baltimore can be found at www.urban.org/url.cfm?ID=311222.

1. Sandra J. Newman, “Low-End Rental Housing: The Forgotten Story in Baltimore’s Housing Boom,” Urban Institute, August 30, 2005.