Major Findings: Finding 4

In a trend with important implications for rental housing policy and program implementation, the increasing demand for shrinking supplies of affordable units meant that, by 1997, severe housing problems were appreciably more concentrated among families with extremely low incomes than they had been in 1991. The total number of renter households with "priority" housing problems of severe rent burdens or severe physical housing problems in 1997 includes the 5.4 million very-low-income renters with worst case needs.¹⁷ Another 685,000 renters also had severe problems, although they are not defined as having worst case needs because their incomes were above 50 percent of the area median.

As Exhibit 16 illustrates, in the 6 years between 1991 and 1997, the extremely-low-income share of all renters with severe priority problems rose by four percentage points, from 65 to 69 percent of the total. By contrast, in each higher income category, the share of renters with severe problems dropped between 1991 and 1997. By 1997 only 6.2 percent of renters with priority problems fell in the "low" income range of 51-80 percent of median made newly eligible for some rental assistance by QHWRA, down from 7.7 percent 6 years earlier. Over that period, the share of renters with priority problems also dropped in the income range between 31 and 50 percent of area median.

When we focus only on worst case needs among very-low-income renters, we find that worst case needs became more concentrated among extremely-low-income renters because needs grew most quickly among this income group between 1991 and 1997. Over this period, the number of households with worst case needs grew by 16 percent among renters with incomes below 30 percent of area median. Among renters with income between 31 and 50 percent of area median income, by contrast, needs were essentially stable during these 6 years, growing by only 1 percent. In sum, by 1997, among those very-low-income renters with worst case needs, over 77 percent of the total (almost 4.2 million families) had extremely low incomes, up from 74 percent in 1991.

• More than two-thirds of unassisted extremely-low-income renters have worst case needs for rental assistance. By contrast, the likelihood of having severe housing problems is much less among renters with incomes above 30 percent of area median income. Only 21 percent of unassisted renters with incomes between 31 and 50 percent of area median have worst case needs. Fewer than 6 percent of renters with incomes between 51 and 80 percent of area median income experience priority problems.

Households with extremely low incomes not only comprise the vast majority of renters with priority housing problems, but they are also in the only income groups highly likely to have these most severe problems. As Exhibit 17 shows, almost three-fourths of unassisted families with incomes below 20 percent of area median income have priority problems, as do two-thirds of those with incomes between 21 and 30 percent of area median.

Among households with incomes above 30 percent of area median income, by contrast, priority problems are much less likely. For those with incomes 31 to 40 percent of area median income, fewer than one-half (three of every eight) have priority problems, while for incomes 41 to 50 percent of area median, only one of every six renter households has priority problems. In the group just above the very-low-income cutoff that is still eligible for units financed by HOME or the LIHTC (51 to 60 percent of area median income), less than 9 percent of renter households have priority problems.

• Federal rental assistance programs continue to be well targeted to the extremely-low-income groups most likely to have worst case needs if they did not receive assistance. Seven of 10 assisted renters have incomes below 30 percent of area median income.

As of 1999, Federal rental assistance programs directed 70 percent of their assistance to extremely-low-income renters (see Exhibit 18). In the public housing and tenant-based Section 8 programs, more than 70 percent of tenants had extremely low incomes, as did over 80 percent of the occupants of projects receiving Section 8 assistance for moderate rehabilitation. In other Section 8 projects, 70 percent of tenants had extremely low incomes. The rental assistance programs thus remain quite well targeted to income groups that are most likely to have worst case needs if they do not receive assistance.

Each program, however, had a somewhat lower share of extremely-low-income tenants in 1999 than had been the case in the 1997 program data tabulated in the last worst case report.¹⁸ This change may reflect increased income among existing tenants or it may reflect new admissions of higher-income families in response to the incentives for increased income mixing incorporated in QHWRA.

• Many assisted families have earnings as their primary source of income.

Current housing assistance programs have many tenants who work, particularly among households who are neither elderly nor disabled. As would be expected, work is not common among either the elderly or non-elderly adults with a disability, who comprise close to half of the 4.2 million assisted households for which HUD has data on tenant characteristics. Among the 2.2 million households with neither elderly members nor members with disabilities, however, 44 percent have earnings as their primary source of income.

As Exhibit 19 shows, shares of households who rely on earnings rise with income. At each income level except the lowest, families with children present are more likely to have earnings as their primary source of income than other households with heads 18-62 and no disabled members.

The data in Exhibit 19 are not directly comparable to earlier extracts from HUD data on tenant characteristics for several reasons and thus do not allow us to determine if earnings are increasing.¹⁹ But two developments suggest that the employment rate is rising among families in public and assisted housing. State by State, non-elderly, non-disabled heads of household in public housing show consistently lower welfare receipt and higher employment levels in 1999 than in 1997.²⁰ In addition, internal reports show that tenant contributions to rent are rising in both the public housing and the tenant-based Section 8 programs, and the most probable source of such increased contributions is increases in earned income.