The rental affordability crisis has been drawing increasing attention from the media, government entities and advocacy groups in recent months. As rental markets across the nation grow increasingly tighter, and as rents continue to outpace stagnant incomes, a growing number of renter households across the income spectrum is finding it increasingly difficult to afford their homes and meet the expenses for other basic living necessities. Census data indicate that 46 percent of nearly 44 million renters in the United States spend more than 30 percent of their income on rent and utilities.
Without a doubt, the post-Great Recession drop in homeownership and the increase in rental demand — partly driven by demographic shifts — play an important role in the current shortage of available and affordable rental units, especially in hot markets like San Francisco, Los Angeles and New York. But the surge in demand cannot be deemed as the sole explanation for the rental affordability crisis that the nation is experiencing. And, as such, we cannot expect demand-based policies to be sufficient to solve the problem, especially at a time when federal assistance programs continue to fall short of meeting the increasing need for affordable housing among low-income households.
When it comes to the housing market, instead, we have to consider the supply problem. Significant gaps in the supply of rental units that are affordable for households in different income brackets are largely due to the inadequate production of homes, particularly in the lower-income spectrum of the housing market.
As the supply of low-rent units has decreased, private market additions to the rental housing stock have shifted to the high end — and more specifically, to the very high end. The latter do not encourage enough supply to ensure that affordable housing trickles down to low- and moderate-income renters. At the same time, despite the continuing effort of programs such as the Low-Income Housing Tax Credit (LIHTC), federal housing and tax policies do not adequately address the increasing gaps in affordable rental housing.
We need a more aggressive intervention by the federal government in boosting the overall supply of rental housing. To do so, the federal government needs to directly go back to the construction business at a large scale, as it did in the past, while avoiding some of the mistakes that have often constrained the public housing program’s implementation and quality over time.
A newly introduced Homes for All program, in which the federal government will engage in the large-scale construction of affordable and good-quality homes, could address just that. The proposed program, which is intended to complement both existing rental assistance programs and the preservation of existing affordable housing stock, calls for an active role in the production of affordable units for renters who are in need of affordable housing through direct grants to localities.
Supporting this type of housing has the potential of meeting three goals: challenging private-market development practices that greatly influence home prices by prioritizing luxury apartment construction; encouraging long-term affordability; and promoting a process by which housing costs will better match household incomes, especially in proximity to employment centers and areas experiencing rapid job growth.
Homes for All recommends making homes available to a mix of incomes, while preserving the ability to target assistance to those with the greatest need. Through design, the socioeconomic status of residents will be impossible to distinguish from the exterior appearance of buildings. At the same time, to avoid segregative patterns, the program promotes a scattered distribution of units and a flexible supply of units to accommodate several different types of households.
The program also encourages mixed-use developments, especially in proximity to public transit; the adoption of universal design principles; energy efficiency; access to broadband; and novel building techniques such as modular construction.
But perhaps the most important element of the program concerns where housing will be built and how it will be managed. Homes for All recommends that homes are built on publicly owned land, to contain construction costs. There are a variety of ways to develop housing on public land. For example, different types of sites — such as vacant, publicly-held land, and underutilized sites such as parking lots and lots where existing public facilities are no longer needed — represent opportunities for the construction of affordable housing. Once the units are completed, they should be permanently held in some form of social ownership, such as community land trusts, which can ensure long-term affordability. These, along with local nonprofit, mission-driven organizations will be in charge of managing and operating the new housing stock.
The private housing market and the government’s decades-long experiment with a laissez-faire approach to supply have not worked well to fill the affordable housing gap. The adoption of a program such as Homes for All has the potential to reinvigorate the government’s role in directly — and equitably — addressing the supply of affordable housing across the nation.