Major Findings: Finding 3
| Finding 3: | The affordable housing stock, as measured by the number of total rental units that are affordable for families with incomes at 30 percent of area median income, continues to shrink. |
Worst case needs have continued to increase despite greater work efforts among very-low-income families because rents are rising more quickly than incomes, particularly for households at the lower end of the income distribution. The critical stock of housing units that are affordable to extremely-low-income households is most vulnerable.
- The housing stock most needed by renters with worst case needs—that is, rental units that are affordable for extremely-low-income households without rental assistance-continues to shrink. The number of rental units affordable to extremely-low-income families dropped by 5 percent between 1991 and 1997, a decline of over 370,000 units.
Between 1995 and 1997, as the total rental stock grew slightly and the national rental vacancy rate rose from 7.2 to 7.8 percent, the number of rental units affordable to extremely-low-income families dropped by 66,000, continuing a long-term trend of decline in such units. These are units affordable to households at 30 percent of area median income, assuming that households spend no more than 30 percent of their income for rent. As Exhibit 13 illustrates, since 1991 the number of such affordable rental units decreased by 372,000 units, a 5-percent drop overall in 6 years. This significant decline occurred among all units affordable to extremely-low-income families, including private market units and assisted units.
- The gap between extremely-low-income families and units they can afford is large and growing. In 1997 for every 100 households with incomes at or below 30 percent of median income, there were only 36 units both affordable and available to them.
The growing scarcity of affordable units is exacerbated by continuing increases in the number of extremely-low-income families, thus further widening this severe affordability gap. Between 1995 and 1997, the number of renter households with incomes below 30 percent of the area median increased from 8.61 million to 8.87 million. By 1997, one out of four renter households had incomes at or below 30 percent of their area median income.14
The continued increase in demand coupled with the diminishing supply of affordable units is exacerbating the mismatch between the number of renter households at or below 30 percent of median income and the number of housing units affordable to them. In 1997, for every 100 extremely-low-income renter households, there were only 76 units with rents that were possibly affordable to them.15 As the top line of Exhibit 14 shows, this summary indicator of affordable supply relative to demand has been dropping steadily since 1991, when it was 85 units for every 100 households.
As dramatic as this disparity between the number of extremely-low-income renters and the number of affordable units appears, the trend shown in the top line of Exhibit 14 actually understates the extent of a rapidly worsening problem. This is because a large number of "affordable" units are not in fact available for rent by families who most need them, but are instead occupied by higher-income households. In 1997, the number of affordable units that were actually available for rent to such families—that is, units that were either already rented by extremely-low-income households or vacant for rent—was only 36 units for every 100 families. Even worse, this ratio represents a serious decline over just 2 years—because in 1995, 44 units were both affordable and available for rent for every 100 families. Thus, in just 2 years, we lost almost one out of five units that were affordable to extremely-low-income families and were actually rented by such families or vacant and for rent. Overall, this important indicator declined by 23 percent since 1991. Compared to the need for such units, the affordable and available stock is eroding at an alarming rate.
- In a modest reversal of the disturbing loss in very-low-rent units found between 1993 and 1995, between 1995 and 1997 there was a 2-percent increase in the number of rental units affordable to incomes at or below 50 percent of median.
One of the more disheartening results highlighted in HUD's last worst case report was the sharp loss of private market rental units affordable to incomes at or below 50 percent of area median income. Between 1993 and 1995, the number of private market units affordable to very-low-income renters dropped by almost 900,000. This loss was particularly alarming because two-thirds of the units lost had rents affordable to incomes between 31 percent and 50 percent of median, a rent range in which the number of units had previously been growing on average across the Nation.16 This finding showed that losses of affordable rental units had not only increased greatly in number between 1993 and 1995, but also had expanded to affect rent categories higher than rents affordable to 30 percent of area median for the first time.
Because of the 1997 change in AHS subsidy questions, this report must examine changes in all units affordable to these income categories, rather than focusing on private market units by excluding subsidized or no-cash-rent units. As Exhibit 15 shows, between 1993 and 1995 this category had changes quite similar to those shown in the previous report for private market units: the total of all units affordable below 50 percent of median income also dropped by some 900,000 units between 1993 and 1995, from 16.7 to 15.8 million, and the decline was larger (from 9.8 to 9.2 million units) for units with rents affordable to incomes between 31 percent and 50 percent of median than for units with less costly rents.
Between 1995 and 1997, however, there was a welcome turnaround, as the number of rental units affordable to incomes at or below 50 percent of median rose by 340,000 overall for a modest increase of 2 percent. This rise occurred because the number of units with rents affordable to the 31-50 percent of income range increased significantly, by over 400,000. This improved situation may well reflect units added to the stock with subsidies from HOME and LIHTC dollars. Although units in this range are usually not affordable without rental assistance to the most needy extremely-low-income group, they should increase the supply of units useable with vouchers in most locations.
While this recent increase in units affordable to very-low-income renters is far preferable to continued losses, it nevertheless should be viewed in the broader context of an overall decline in the number of affordable units since 1993. When the large losses in affordable units between 1993 and 1995 are taken into account, over just 4 years there has been a net loss of 540,000 units that are affordable to households with incomes at or below 50 percent of the area median income, with most of the decline occurring in the critical range affordable to families with extremely low incomes. Although the reversal of previous losses in the range affordable to incomes between 31 and 50 percent of area median is welcome, the squeeze on the most needy extremely-low-income families continues to worsen.
14 Past worst case needs reports also highlighted declines in numbers of private market unassisted units that are affordable to these families. However, because of changes in questions about assisted housing in the 1997 American Housing Survey, the data on all affordable units provide a more reliable comparison with past surveys than would be possible from examining private market units alone.
15As discussed in Rental Housing Assistance at a Crossroads, HUD's 1996 report to Congress, this summary measure of mismatch compares the number of extremely-low-income renters against the number of units that can be rented at 30 percent of the extremely-low-income cutoff, that is, 30 percent of the area median income, adjusted for household size. Both units with no cash rent and renters living in no-cash-rent units are excluded from this comparison. This ratio provides an upper-bound estimate of "affordable" units because, although all units are affordable by definition to households at the income cutoff, they are not necessarily affordable to households with incomes below 30 percent of area median income.
16 As HUD's 1996 report to Congress documented (Table A-17), between 1985 and 1993 private market units affordable below 30 percent of area median had dropped by 19 percent, but the number of units in the range affordable to incomes between 31 and 50 percent of median had grown modestly, by 2 percent.
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