Census Shows U.S. Housing Crisis Is Worsening As The Search For Fixes Grows More Desperate

The latest national proposal to take a crack at the nation's affordable housing problem came last week in the form of a bill introduced in the Senate optimistically called the Decent, Affordable, Safe Housing for All Act.

It is the latest in a long string of bills, passed and never passed, to address the problem.

The almost simultaneous release of the 2020 U.S. census data doesn't show the full scope of the housing affordability crisis, but it does point to demographic and housing trends of the 2010s that will make providing affordable housing — or housing at all, for some parts of the country — a taller order than ever. 

Yet the slog to find answers to the problem at all levels of government and in the private sector will continue, simply because the problem is too serious to ignore, and it is affecting other parts of the economy.

"The lack of affordable housing is often more pernicious than people really understand," Berkadia Senior Vice President and Head of Affordable Housing David Leopold said. "The negative impact on individual households is well understood, but less so is the impact on communities and the resilience of local economies."

A shortage of affordable housing can be a headwind for growth as a whole, holding down investor interest and valuations for area properties, Leopold said, as well as business formation. Housing never exists in a vacuum, and where a spectrum of housing is missing it can hamper long-term growth.

The census data dropped earlier this month clarified the struggle for affordable housing. The Census Bureau reported several trends, few of them sanguine when it comes to U.S. housing. 

According to the bureau, the total number of U.S. housing units grew by 6.7% between 2010 and 2020, or about half the rate of growth during the previous decade. The nation's population grew by 7.4%, also a slowdown, but still outpacing new housing. The percent of housing units that were vacant nationwide dropped from 11.4% in 2010 to 9.7% in 2020.

The housing squeeze is particularly acute in major metro areas, which grew at the expense of smaller cities and towns during the 2010s. For the most part, the Census Bureau reports, the largest metro areas had lower housing vacancy rates than the nation as a whole.

Among the 30 largest Core Based Statistical Areas, or CBSAs, which include metro and micro areas, only four (Miami, Phoenix, Tampa and San Juan, Puerto Rico) had housing vacancy rates above the national rate of 9.7%.  

The lowest vacancy rates among the 30 largest CBSAs were in Minneapolis (4.6%), Los Angeles (4.8%), Seattle (5.2%) and Portland, Oregon (5.2%), all of which are well known as desirable, increasingly expensive places to live, with a distinct lack of affordable housing. In response to its housing shortage, Minneapolis famously banned single-family zoning in 2018.

At the state and local levels, the affordable housing problem is inspiring a host of referendums, initiatives and programs. 

"We're seeing an increase in the number of state-specific subsidy programs, along with local subsidy programs and local housing trust funds capitalized with local tax revenues," Leopold said.

In 2018, Oregon Measure 102 called for amending the state constitution to allow counties, cities and towns to use bond revenue to fund affordable housing without necessarily retaining complete ownership of the completed housing. The idea was to incentivize construction by allowing for private ownership. It passed easily.

Also in 2018, Californians passed Propositions 1 and 2, a combined $6B for affordable housing, with the first authorizing $4B in general obligation bonds for housing-related programs, loans, grants and projects, and housing loans for veterans. The voters of California also resoundingly defeated a 2020 initiative that would have allowed localities to impose rent control.

Hawaii and Florida will both have housing measures on their ballots in 2022. In Florida, the change would allow localities to set up affordable housing trust funds, which exist in other states. In Hawaii, the initiative would require local jurisdictions to have affordable housing plans.

State initiatives in affordable housing, which started in earnest about 50 years ago, remain ongoing, with a variety of approaches. Some initiatives fund development directly. 

This month, the state of New York has announced a $35M round of funding for the Empire State Supportive Housing Initiative, a plan with a stated goal of creating or preserving over 100,000 affordable housing units. The latest round, for its part, will create 1,400 units.

A common approach to supporting affordable housing is state support for local housing agencies and authorities, whose ears are closer to the ground when it comes to the need for housing in their area. That can take the form of direct grants, tax credits or organizing events at the local level to encourage affordable housing development.

Local initiatives are sometimes as straightforward as a voter-approved hike in taxes to facilitate affordable housing development. In Summit County, Colorado, which includes the resort town of Breckenridge, two successive initiatives have increased taxes for that purpose.

“Voters recognized that the affordable housing challenges the community was facing were increasing and that more resources were required to address them effectively,” Summit Combined Housing Authority Executive Director Rob Murphy told Summit Daily.

Nonprofits also tend to be deeply involved in affordable housing. In New Jersey, for example, Interfaith Neighbors operates Pathway to Home Ownership, which offers residents of affordable rental housing a structure under which a portion of their rents is put in escrow to be used later as a down payment on a purchase.

Nonprofits are also pursuing construction innovations to make building less expensive. In San Francisco, HomeRise, used off-site construction to build a 250-unit housing complex, cutting costs by 20% — about $60K per unit — and cutting construction time by five to nine months, Shelterforce reports.

United Hope Builders, based in the housing-starved Bay Area, has partnered with a modular housing maker to built units of under 1K SF in Idaho, and deliver them for placement in the area.

Land is tight in northern California, and United Hope Builders wants to address that issue by targeting "non-traditional landholders," such as the churches and other organizations in the area that own wide-open parking lots, Mountain View Voice reports.

For-profit companies are also part of the effort to ameliorate the housing crisis. They are doing it for a profit, of course, but also argue that they are doing their bit to fight the crisis as well.

"We're not talking about just any one part of the country, the housing problem is absolutely national — it's urban, it's rural, it's suburban, it's East Coast, West Coast, middle of the country, everywhere," Rhino CEO Paraag Sarva said.

Rhino offers a product that replaces cash security deposits with insurance for renters who might not be able to scrape together one or two months' rent at one go. The insurance protects owners in the way that a security deposit would, in the event of damage to the property, Sarva said. Renters typically pay a few dollars a month for the insurance.

Sarva says his company is doing more than merely offering insurance to renters, but is also pushing state and local officials to allow such insurance to take the place of a security deposit.

"Last year we saw an increase in interest from renters, landlords and property managers, and also from policymakers," Sarva said. "We've been working very closely with legislators to talk about what technology can do for the renting equation."

It isn't clear which initiatives will work, but it is important that entities of all sizes keep at the problem, said Innovative Housing Opportunities President and CEO Rochelle Mills, who is an affordable housing developer based in Santa Ana, California.

It is also critical for policymakers to relax counterproductive rules governing affordable housing, she said.

"The challenge can be that the right hand isn't always working with the left hand," Mills said. "For instance, it's good for many residents of affordable housing to save enough for a down payment to buy something.

"But sometimes if they do, they — and the affordable housing developer — are penalized because they go over their income threshold. Sometimes residents are even pushed out for that. In what way does that make any sense?"

Mills said she is glad that it isn't true that as California goes, so goes the nation.

"Much of the rest of the country has more of an appetite for innovation when it comes to affordable housing," she said. 

"The things that excite me are creating pathways to homeownership, because that's how households build wealth, and communities gain resilience," Mills said. "You find that in other places." 

The DASH Act specifies a number of federal incentives and policy changes aimed at increasing affordable housing development. The measure would reward with block grants those jurisdictions that change their zoning policies in certain ways, such as permitting multifamily development in places previously zoned single-family, allowing granny flats, lowing parking requirements and eliminating minimum lot sizes.

The measure would also expand the Low Income Housing Tax Credit and establish a tax credit for owners and operators of affordable housing whose size would be according to the difference between market rents and tenant income. The scheme would allow landlords to collect the equivalent of market rents, while the tenant paid no more than 30% of household income.

Also, the DASH Act would set up an entirely new Middle Income Tax Credit, designed to offer a tax credit to developers and operators to provide affordable housing to tenants between 60% and 100% of area median income.

The bill doesn't specify the cost of its proposals, and its odds are long in the currently divided Congress, but many of the bill's ideas are in circulation on Capitol Hill. Historically, successive congresses have had a habit of expanding and tinkering with affordable housing initiatives across the decades.

Before the latest affordable housing bill and the infrastructure bill, 2021 proposals in Congress to address the problem were introduced in a springtime flurry, though none have advanced. In April, three bills were introduced to make the federal government's investment in affordable housing more robust, including $70B to repair public housing and $45B for the Housing Trust Fund to build and preserve affordable units.

The original version of the infrastructure bill included funding for more affordable housing, but the $1 trillion version eventually passed by the Senate in August did not. It did provide for infrastructure work that would indirectly benefit communities with clusters of affordable housing, however, such as for improved mass transit and broadband access.

One new piece of momentum has already transpired at the federal level, Leopold said: The Federal Housing Finance Agency made a rule change early this year that will ramp up the amount of funding that Fannie Mae and Freddie Mac provide for affordable housing development.