Major Findings: Finding 1
| Finding 1: | Despite a long and robust economic expansion, worst case housing needs reached an all-time high of 5.4 million families in 1997. These severe problems among unassisted renters increased by at least 4 percent between 1995 and 1997. |
- In 1997, 5.4 million unassisted very-low-income renter households, a record number, paid over half their income for housing or lived in severely inadequate housing.
According to the 1997 American Housing Survey, almost 5.4 million very-low-income renters had "worst case" needs for rental housing assistance and were not already assisted by Federal, State, or local rental assistance programs. Because this total excludes households participating in State and local programs,6 it is not directly comparable to the 5.3 million worst case estimate for 1995 highlighted in HUD's 1997 Report to Congress, Rental Housing Assistance—The Crisis Continues. It does, however, represent an increase of more than 200,000 households over the most comparable estimate available for 1995.
For as long as worst case needs have been reported, affordability rather than housing quality has been the predominant problem facing unassisted renters. In 1997, 94 percent of households with worst case problems paid more than one-half their income for rent. The proportion of worst case families living in housing with severe physical problems was 9 percent in 1997. As Exhibit 7 illustrates, only 3 percent of the total had both a severe rent burden and severe physical problems. However, another 20 percent had multiple problems, having one or more moderate problems in addition to a severe rent burden or severe physical problems. Specifically, 14 percent of those with worst case needs for assistance paid more than half of their income for rent and also lived in crowded or moderately inadequate housing, while 3 percent lived in severely inadequate housing while also experiencing either crowding or a rent consuming 30-49 percent of their income.
Although almost one-fifth of worst case households had more than one housing problem, as Exhibit 7 details, severe rent burden was the only housing problem for 77 percent of families with worst case needs. Since these families lived in adequate, uncrowded housing, but paid more than half of the their income for rent, their only housing problem could be solved if they could obtain a Section 8 voucher that allowed them to afford their current housing. The share of worst case households whose only housing problem is a severe rent burden has risen substantially over the 20 years for which essentially comparable AHS data exist. Between 1978 and 1989, using the worst case needs definition of earlier reports, the share of worst case households whose only housing problem is a severe rent burden rose from 65 to 71 percent. Between 1991 and 1997, using the 1997 definition of worst case needs, this share rose from 74 to 77 percent.
Continuing a rise observed between 1993 and 1995, the incidence of overcrowding rose slightly between 1995 and 1997 among all renters (from 4.9 to 5.6 percent), but among very-low-income renters crowding remained stable at 7.9 percent. Overcrowding alone does not qualify a household as having worst case needs in this or previous reports to Congress.7
- Between 1995 and 1997, the number of households with worst case needs increased by more than 200,000. This represents a 4-percent increase in worst case needs, twice the rate of growth in the number of all U.S. households during the same period.
To determine whether worst case needs changed between 1995 and 1997, the 5.4 million figure for 1997 was compared to reestimates of worst case needs in earlier years that similarly—but newly—include households reporting "State or local government" assistance as assisted. Exhibit 8 presents new estimates for 1991, 1993, and 1995 that are as comparable to the 1997 worst case needs estimate as is possible by using previous AHS questions.8 Using the revised, and lower, definition of worst case needs necessitated by the 1997 AHS questions, worst case needs are shown to have increased by 205,000 between 1995 and 1997. This represents a 4-percent increase in the number of families with worst case needs, twice the rate of increase in the number of all U.S. households during this period. For comparison, Exhibit 8 also graphs the estimates of worst case needs used in HUD's past reports to Congress ("past definition"). For our purpose of tracking and assessing change over time, it is encouraging that both the new and old approaches show similar trends during the early 1990s-a sharp increase of some 400,000 households between 1991 and 1993, followed by essential stability between 1993 and 1995. 9
- Since 1991, despite a robust economic recovery, the number of families with worst case needs for rental assistance rose by at least 500,000, an increase of 12 percent, compared to 7 percent for all households.
The new estimates show that the number of households with worst case needs rose from 4.8 to 5.4 million between 1991 and 1997, an increase of 12 percent, despite the economic expansion. Because growth in worst case needs exceeded that of very-low-income renters, the share of very-low-income renters with worst case problems also rose, from 34 percent in 1991 to 37 percent in 1997. As Exhibit 9 shows, the increase in worst case needs resulted from growth in severe rent burdens among unassisted very-low-income renters, from 4.5 million households in 1991 to 5.1 million in 1997.10
Comparison of 1995—97 changes in assistance is also complicated by the major changes in AHS assistance questions discussed in Exhibit 1. Nevertheless, the apparent decrease in numbers of very-low-income renters receiving assistance may have in fact occurred because a decrease would be consistent with two developments during this period: no additional "incremental" vouchers or certificates were issued, and Federal preferences directing those assisted units that became available from turnover to worst case households were suspended.11
As will be discussed below in Finding 9, other strong evidence implies that worst case needs, if they could be consistently measured in both years, may well have increased by more than 205,000 between 1995 and 1997. This conclusion comes from examining severe rent burdens among all very-low-income renters, including both those with no assistance and those reporting some type of rental assistance. (Because of the major changes in the AHS assistance questions between 1995 and 1997, comparing estimates that do not rely on answers to those questions in either year is likely to provide a more accurate picture of changes over time than is possible from our effort in Exhibit 8 and elsewhere in this report to make reestimates of unassisted renters in 1995 and earlier years as comparable to the 1997 estimates as possible.) The number of all very-low-income renters who pay more than half of their incomes for rent rose by 500,000 between 1995 and 1997 to reach an all-time high of 6.4 million. This increase of 500,000 among very-low-income renters in the problem that forms the main component of worst case needs suggests strongly that the measured increase of 205,000 in worst case needs discussed above is an underestimate.
To summarize, the fact that worst case needs continue to rise, rather than decline, during a period of strong economic growth demonstrates that acute housing needs, particularly for the poorest families, constitute a persistent problem not eliminated by economic growth. Instead, strong economic growth appears to exacerbate housing affordability problems for the poorest families as rents are driven upward by rising demand.
6 Some of these households have severe rent burdens or severely inadequate housing, and therefore were included in the worst case count for 1995 in HUD's 1998 worst case report.
7Under the Federal preference system in effect between 1988 and 1996, crowding did not automatically give a household a Federal preference for admission to assisted housing programs.
8Although this is the best comparison possible from existing data, it is likely to give an underestimate of changes in worst case needs between 1995 and 1997. As discussed above in Exhibit 1, it is unlikely that the number of assisted households actually increased by 400,000 between 1995 and 1997.
9 As noted in Chapter 1's discussion of data sources, estimates of worst case needs from the AHS are necessarily low to the extent that they omit homeless individuals and households, but high to the extent that income underreporting inflates counts of very-low-income renters who spend more than half of their income for rent. The only comparisons of income as reported on the AHS to independent estimates from national product accounts suggest that on average AHS estimates of total money income are some 14 to 15 percent lower than the independent estimates, with underreporting greatest for income from interest and dividends. If we could assume that all households equally underreported income by 15 percent (which is unlikely to be the case), the AHS estimate for worst case needs in 1997 under the 1997 definition would be 4.4 million rather than 5.4 million, while that for 1991 would have been 3.7 million rather than 4.8 million. These "what-if" estimates suggest that underreported incomes inflate AHS estimates of worst case needs by approximately one-fifth, but that they do not reduce the utility of the AHS for consistently tracking changes in worst case needs over time. Similar estimates of the effect on estimates of worst case needs of failing to include the homeless can not be quantified.
10Although the 1997 counts of severe physical problems are presumably more accurate (as discussed above in Exhibit 1), they should not be compared directly with earlier data because of 1997 question changes. The 1991-95 data clearly show a downward trend in numbers of severely inadequate units.
11The Federal preferences were suspended by the appropriations acts for fiscal years 1996, 1997, and 1998. As explained in Exhibit 5, they were replaced in 1998 by explicit targeting of assistance to households with incomes below 30 percent of area median income.
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