Executive Summary

• The persistence of a housing affordability crisis for very-low-income renters despite the robust economic growth of the 1990s.

• A reduction in the stock of affordable rental housing and the elimination of new Federal rental assistance, beginning in 1995.

• A sharp increase in needs for rental housing assistance among the working poor.

• The increased suburbanization of housing needs.

These findings have significant implications for Federal housing policy. To begin to ameliorate this severe housing crisis, Congress should resume the expansion of Federal tenant-based rental assistance targeted to those with the most severe needs. In addition, Congress should expand programs like HOME and the Low Income Housing Tax Credit which subsidize the construction and rehabilitation of affordable rental housing. Finally, Congress should to the maximum extent possible continue to focus scarce Federal public and assisted housing opportunities on those households with the most severe housing needs, while still fostering a greater income mix in public and assisted housing developments.

Finding 1:

Despite robust economic growth between 1993 and 1995, the number of very-low-income renters with worst case housing needs remained at an all-time high -- 5.3 million.

• In 1995, 5.3 million very-low-income renters without housing assistance paid over half their income for housing or lived in severely substandard housing. Households with worst case needs are defined as unassisted renters with incomes below 50 percent of the local median who pay more than half of their income for rent or live in severely substandard housing. Renters with incomes below 50 percent of area median income are called "very-low-income" renters.

• Households with the lowest incomes are most likely to have worst case needs. Almost 70 percent of unassisted renters with extremely low incomes had worst case housing needs in 1995. In this report, renters with incomes below 30 percent of area median income are called "extremely-low-income" renters. Nationally, 30 percent of median income approximates the poverty level, but the definition of extremely low income is adjusted for geographical differences. As a national average in 1998, "extremely low income" means less than $13,590 for a family of four or less than $10,872 for a two-person family.

Finding 2:

The stock of rental housing affordable to the lowest income families is shrinking, and Congress has eliminated funding for new rental assistance since 1995.

• Between 1993 and 1995, there was a loss of 900,000 rental units affordable to very-low-income families, a reduction of 9 percent. There was an even greater reduction -- 16 percent -- in the number of units affordable for "extremely-low-income" renters.

• Federal housing policy has done little to ameliorate these problems. Since 1995, Congress has denied Administration requests for new rental assistance and ceased funding for new incremental rental assistance to serve families with worst case needs. This is a historic reversal of Federal housing policy, which had continuously expanded Federal rental assistance in every year prior to 1995. From 1978 through 1982, an average of 224,000 additional households were provided Federal rental assistance each year. The average number of new households getting assistance dropped to approximately 146,000 during the 1980s and early 1990s.

Finding 3:

The fastest growth in worst case needs in the 1990s was among working families.

• Full-time work should provide a family with an income sufficient to afford a decent place to live. In fact, having a low-paid job is increasingly unlikely to lift a family out of poverty or resolve worst case housing needs. Between 1991 and 1995, worst case needs rose by 265,000, or 24 percent, for renters with annual earnings of at least one full-time worker at the minimum wage. By 1995, there were 1.4 million such households with worst case needs.

• While the greatest numbers of worst case needs are in central cities, a large and fast-growing number live in the suburbs. The first half of the 1990s saw a suburbanization of worst case needs as more than 1.8 million of the 5.3 million households with worst case needs -- or one of every three -- lived in the suburbs in 1995. Suburban worst case needs grew by 9 percent from 1991 to 1995.

Finding 5:

The most serious housing needs are concentrated among households with the lowest incomes.

• Almost 4 million of the 5.3 million households with worst case needs have extremely low incomes -- below 30 percent of median. Almost 7 of every 10 such households pay more than one-half their income for rent or live in severely inadequate housing when they are not assisted.

• The frequency of worst case needs declines sharply as income rises. Only 26 percent of unassisted renters with incomes between 31 and 50 percent of median have worst case needs and fewer than 5 percent of renters with incomes between 51 and 80 percent of median experience such problems.

Finding 6:

Of the 12.5 million persons in households with worst case needs, almost 1.5 million are elderly and 4.5 million are children. The number of adults with disabilities in households with worst case needs is estimated between 1.1 and 1.4 million.

• From 1993 to 1995, there was a surge in the number of very-low-income single individuals who are not elderly, even as the overall number of very-low-income households declined slightly. Importantly, the likelihood of having worst case needs also grew among non-elderly singles. Although the American Housing Survey does not measure disabilities directly, many of these individuals with worst case needs have disabilities.

• It is clear that both single individuals with disabilities and other households with a disabled member face substantial and growing housing problems. The number of adults with disabilities living in households with worst case needs is estimated at between 1.1 and 1.4 million in 1995.

• More than 2.1 million families with children had worst case problems in 1995. Among the 2.1 million families with children who had worst case problems, 930,000 had income from either Aid to Families with Dependent Children (AFDC) or Supplemental Security Income (SSI).

• More than 1 million elderly households had worst case problems in 1995.

Finding 7:

Worst case needs continue to shift to the West.

• The number of very-low-income renters in the West continued to increase between 1993 and 1995, while dropping in other regions. The West had the highest percentage of very-low-income renters with acute housing needs, 42 percent, compared with 32 percent in the South, 33 percent in the Midwest, and 39 percent in the Northeast. The result is that the number of Western households with worst case needs reached a record 1.56 million in 1995.

• The mismatch between available extremely-low-rent units and extremely-low-income renters is large and getting larger in all four census regions. Shortages are worst in the West, however, where in 1995 for every 100 extremely-low-income renters there were only 31 units that were either already occupied by extremely-low-income renters or vacant and for rent, compared with the nationwide figure of 44 units per 100 renters.

The findings of this report suggest that economic growth alone will not ameliorate the record-level housing needs among families with limited incomes. Not even families working full-time at the minimum wage can afford decent quality housing in the private rental market. The report also makes it clear that housing needs are not just found in big cities but increasingly in the suburbs as well.

The report suggests a clear and compelling need for the Congress to provide greater support for Federal housing assistance -- by expanding both tenant-based rental assistance and programs that create and rehabilitate more affordable housing units. And Congress should act carefully in reforming the income targeting rules for public and assisted housing programs to balance the goals of achieving a greater income mix in public and assisted housing developments and providing assistance to families with the most severe housing needs.

New Housing Assistance

• 103,000 New Vouchers: The Administration has asked Congress to fund 103,000 new housing assistance vouchers, including 50,000 welfare-to-work vouchers to help welfare recipients get and keep jobs. This report documents the need for those vouchers to reduce the overall number of families and individuals with worst case needs and to provide the portable housing assistance critical for a successful transition to work.

• Ending the Delay on Reissuing Vouchers: Congress should end immediately its cost-saving requirement placed on local housing authorities to hold for three months rental subsidies returned by families leaving the program. This practice reduces by 40,000 the number of subsidies in circulation and thus the number of families receiving housing assistance.

• Expanding Production of Affordable Housing Through HOME and the Low Income Housing Tax Credit: The Administration is also seeking to expand tools to build and rehabilitate affordable housing. HUD's FY 1999 budget includes increased funding for the HOME program, along with a new HOME Bank, a loan guarantee feature that would allow communities to leverage up to five times their Federal grants for larger scale housing investments. In addition, the Administration is proposing a substantial expansion of the Low Income Housing Tax Credit that would create 180,000 new affordable rental units over the next five years.

Careful Income Targeting of Federal Housing Assistance

The body of the report is presented in three parts. The introduction (chapter 1) explains the background and approach of this report. Chapter 2 summarizes statistical data from HUD analyses of worst case needs, documenting major findings. Chapter 3 explores the implications of the findings for current policy decisions. Appendices provide detailed definitions and statistical tables.