The United States is currently in the midst of an affordable housing crisis. Rents have skyrocketed and are still on an upward trajectory, causing almost 50 percent of renters to be cost-burdened, i.e., they are spending more than the recommended 30 percent of their income on rent. Mothers and fathers looking for permanent, safe, and stable housing solutions face more challenges than perhaps ever before.
In some cities, such as New York and San Francisco, the percentage of income that goes to the landlord every month is much higher. For a detailed overview of the state of the nation’s housing, click here for Harvard University’s 2018 report.
The Effect of the Housing Crisis on Low Wage Earners
A study of the rental market by The National Low Income Housing Coalition determined that someone working a 40 hour week and earning minimum wage can afford to rent a two-bedroom apartment without being cost-burdened in exactly zero counties across the nation. In other words, it isn’t possible.
Are High Rents Causing More People to Buy?
The answer to this question is a resounding no. Because renters are paying so much in rent, many of them are finding it impossible to save for a down payment on buying a home. Compounding this situation is the fact that the rise in wages is not keeping pace with the increase in home prices.
How Did We Get Here? – Blame Policy, Demographics, and Market Forces
A mix of market forces, policy decisions, and demographic changes have come together to make building affordable housing far from a simple proposition. Here are the main factors driving up the cost of housing:
- Efforts to increase the supply of affordable housing tend to run into a brick wall built of high costs, zoning restrictions, and geographic limits.
- The building of affordable rental units hasn’t kept pace with demand. One example – in Oakland, a development offered 28 units at well below market rates – 4,000 hopeful people applied.
- Because of lengthy and expensive approvals, higher land and material costs, and rising wages for construction workers, builders face economic pressures to concentrate on higher-end housing.
- Affordable housing regulations are often counterproductive. In some locales, zoning laws have been passed requiring a percentage of units in any housing development to be affordable. But this action discourages investment as developers have to sell a large share of units at a loss.
What is the Solution to the Affordable Housing Crisis?
Using taxpayer money to fund affordable housing programs has not achieved a great deal of success over the past twenty or so years. But new ways to solve the problem are being looked at, including:
- Building More Modular Homes – Modular building entails manufacturing parts at an off-site location and then transporting them to the job site for assembly. Affordable modular homes require anywhere from 30 to 50 percent shorter construction schedules, and subsequently less capital to construct than traditional housing.
- Investing in Established Buildings – Take a walk through almost any metro area, and you’ll see boarded-up buildings or old government buildings that are no longer being used. Cost-effective ways can be found to turn these spaces into affordable housing units. Click here to see how one old building in Detroit was turned into affordable housing units.
- Normalizing Tiny Living Spaces – Tiny homes maximize space and create cost-effective living spaces. Local housing boards can encourage tiny living development by relaxing zoning restrictions and funding builders.
- Creating Tax Incentives for Employers – State governments could consider incentive programs where employers are rewarded with credits and tax benefits for covering a portion of their employees’ mortgages or rents.
- Using Funds More Responsibly – Public housing handouts tend to push recipients toward remaining under a certain income level so they can continue to receive subsidized housing. Public housing funds could be used more strategically so that low-income families could be prepared for financial independence down the road. For example, a percentage of funds could be set aside every month that renters are unable to touch until they are ready to buy a home.
Working Together to Find an Answer
We can all agree that affordable housing is a good thing. The problem is that in the divisive political arena we currently have, there is no agreement on how to solve this problem. Party leaders from both sides of the aisle need to come together and work toward a solution that’s practical for the American people. All it takes is setting aside party differences, and progress could be made.
This content is sponsored by Andrew Armstrong.