Summary

Lack of housing affordability is a leading cause of homelessness in America. The U. S. Conference of Mayors has found that lack of affordable housing now is by far the most commonly-cited reason for family homelessness nationwide. During fiscal 2008, family homelessness was up 9 percent, to about 517,000 homeless persons living in families, according to federal statistics. The term "affordable housing" refers to any housing, whether subsidized or not, that costs not more than 30 percent of household income.

Lack of housing affordability also is a leading cause of homelessness overall. Somewhere between 1.6 million and 3.5 Americans were homeless at some time during fiscal 2008 -- about 40 percent of them children -- according to most estimates.

Lack of housing affordability causes or aggravates the poverty of many millions of other Americans. In 2006, for example, more than 9 million low-income households (98 percent considered low-income) paid more than half of their income for housing. The federal standard of affordable housing is housing costing 30 percent or less of household income.

Between the fourth quarter of 2006 and the same quarter in 2008, the number of renter households grew by 2.2 million nationally, as the number of homeowners declined. The rent for a primary residence actually rose in 2008, amid the recession, in 13 of the 14 metropolitan areas covered by the Consumer Price Index (CPI). The national poverty rate for 2008 rose from 12.5 percent to 13.2 percent of the population.

Most low-income families are renters, not homeowners. However, an estimated 40 percent of the households displaced by foreclosures are renters, as landlords default on their (often subprime) mortgages. During the third quarter of 2009, more than 14 percent of borrowers (7.4 million American mortgage-holders) were in trouble on their mortgages -- a new record, according to the Mortgage Bankers Association. An estimated 2.38 million properties were somewhere in the foreclosure process.

There are encouraging signs that the prolonged economic downturn may be abating. When the housing market finally recovers, the stage will be set for another round of housing shortages, and hyper-inflation in housing prices, due largely to exclusionary housing policies (also called regulatory barriers to affordable housing (RBAHs)).

It is crucial to eliminate those policies in order to avoid another vicious cycle of hyper-inflation and collapse in the housing sector.

Other factors also demonstrate the need for sufficient affordable housing reasonably close to where people work and obtain services. For example:

  • Petroleum prices have spiked repeatedly in recent years, underscoring the need for reducing petroleum use; and
  • Greenhouse gases created by the use of fossil fuels such as petroleum contribute to the Earth’s problematic climate change.

For further information and sources, please see below . . .


Discussion and Sources: December 2009

N.B.: Endnotes in this article are not hyperlinks. Please see end of article for sources.

Homelessness and poverty

Lack of affordable housing is a leading cause of homelessness in America. The U. S. Conference of Mayors identified it as by far the most common cause of family homelessness nationwide for 2008.[1] Family homelessness has increased dramatically since the recent recession began – including a 9 percent jump (from about 473,000 to 517,000 homeless persons living in families) during fiscal 2008, according to federal statistics.[2] The number of people in suburban and rural shelters rose almost 40 percent during that period.[3]

Lack of affordable housing also is a leading cause of homelessness among other people.[4] Estimates of overall homelessness vary. The U.S. Dep’t of Housing and Urban Development reports that about 1.6 million different Americans were homeless at some time during fiscal 2008. Other recent estimates have ranged from 2 million to 3.5 million people (about 40 percent of them estimated to be children).[5]

Lack of affordable housing also contributes to the poverty of many millions of other Americans. An increasing portion of the population lives in poverty. The national poverty rate for 2008 jumped from 12.5 percent to 13.2 percent of the population.[6] “The rise in the poverty rate, to the highest level since 1997, portends even larger increases [in 2009, economists said, as 2009] has registered far higher unemployment than in 2008.”[7]

Most low-income families are renters, not homeowners.[8] To illustrate the effects of the recent boom and bust in the housing market on those families -- in 2006, more than 9 million renter households nationwide paid more than half of their income for housing, and 98 percent of them were considered low income.[9] The federal standard of affordable housing is housing costing 30 percent or less of annual income.[10]

Then, between the fourth quarter of 2006 and the same quarter in 2008, the number of renter households grew by 2.2 million, as the number of owner-occupied households dipped.[11] In 2008, amid the recession, the rent of a primary residence actually rose in 13 of the 14 metropolitan areas covered by the Consumer Price Index (CPI).[12] Low-income Americans have suffered from both housing boom and bust.

The overall unemployment rate reached 10.2 percent on a seasonally adjusted basis in October 2009. [13] That figure was less than the post-World War II peak of 10.8 percent, reached in late 1982, but over the three years ending in October 2009, the overall unemployment rate rose by 5.8 percentage points -- the largest such increase since the Great Depression.

The proportion of workers who have been out of work for more than 27 weeks also was higher than ever since the Great Depression.[14] The broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October 2009.[15]

Clearly, many low- and moderate-income Americans are facing severe challenges finding and keeping affordable housing.

Effects of subprime lending crisis

The subprime lending crisis has shaken the nation’s economy severely since 2007. The crisis is closely related to shortages of affordable housing.

Subprime mortgages are held by real estate purchasers who lack sufficient credit to qualify for less costly and/or onerous mortgages to finance their purchases. More and more Americans resorted to subprime mortgages during the early years of this century, in order to buy into the market as prices escalated. For example, between 2004 and 2007, more than half of the new mortgages in the Washington, DC, metropolitan area were subprime adjustable rate mortgages (ARMs).[16]

Massive defaults on subprime and other mortgages precipitated the foreclosure crisis, which contributed to the recent recession and national financial crisis. During the third quarter of 2009, more than 14 percent of borrowers (7.4 million American households) were in trouble on their mortgage – a new record – according to a Mortgage Bankers Association (MBA) survey.[17]

The problem mortgage rate was up from about 10 percent of borrowers who were in trouble during the same period in 2008. About 9.6 percent of borrowers were delinquent on their mortgage during the third quarter of 2009, according to the survey, and another 4.5 percent more (involving an estimated 2.38 million properties) were somewhere in the foreclosure process.[18]

Foreclosure on a rental property typically leads to the eviction of tenants. It has been estimated that 40 percent of the households displaced by foreclosure are renters.[19] By 2009, about 7 million rental households living on very low incomes (31-50 percent of area median income) in small rental properties were at risk of foreclosure, according to the National Low Income Housing Coalition.[20]

Further, at least 10 percent of Americans who lost their housing units due to foreclosure in 2008 became homeless as a result, according to survey responses from 159 organizations nationwide that deal with homelessness issues.[21] That figure was the median percentage given in the responses. The average percentage was 19 percent.[22]

Foreclosures might not reach their highest levels until late 2010, according to the MBA’s chief economist, based on unemployment rates, which may not peak until at least mid-2010. Even after foreclosure rates peak, he noted, they are likely to remain elevated as borrowers in regions that have had steep price declines and now owe more than their home is worth continue to struggle.[23]

The problems continue to be particularly acute in the Sun Belt states, such as California and Florida, which accounted for about 43.4 percent of the foreclosures started during the third quarter.[24] But the foreclosure problem is nationwide and is building despite a massive government program that pays lenders to lower borrowers’ payments.

Effects of possible economic recovery

On a brighter note, the nation’s gross domestic product expanded at an annual rate of 3.5 percent in the quarter that ended in September 2009, according to the Commerce Department.[25] American stock markets rallied beginning in March 2009. But government programs to encourage consumer spending on things like cars and houses were expiring by September 2009, and employers remained reluctant to hire more workers, suggesting the economy may face further setbacks in the coming year.[26]

When the economy finally recovers, the stage will be set for yet another round of rising housing demand and resulting hyper-inflation in housing prices in many metropolitan areas of the United States That historic pattern has been due largely to exclusionary housing policies (also called regulatory barriers to affordable housing (RBAHs)).

It is crucial to eliminate those policies in order to avoid another vicious cycle of boom and bust in the housing sector. The Center (EHI) focuses on eliminating those policies.

Effects of exclusionary housing policies

Exclusionary housing policies are “among the principal culprits behind the nation’s persistent [housing] affordability problems” (in the words of the Harvard University Joint Center for Housing Studies).[27] Those policies consist of unnecessary zoning and other housing-related government restrictions and burdens that interfere with efforts to build or preserve needed low- and moderate-income housing.

Exclusionary housing policies sometimes defeat those efforts, and important recent research indicates that they increase the costs of what is produced by more than 50 percent in many American metropolitan areas – seriously limiting the amount that can be provided.[28]

Exclusionary housing policies play havoc with the housing market. By driving up housing costs and aggravating housing shortages, those policies contribute to hyper-inflation in housing prices in many areas during normal times. High and rising prices cause many renters and homeowners to pay excessive housing costs, and they lead many would-be purchasers of low- and moderate-income residential properties to enter into high-risk financing, such as subprime mortgages. As mentioned, the inability of many purchasers to keep up with the high costs of those mortgages contributed to the recent mortgage meltdown, which in turn contributed to the recession and national financial crisis.

The highest courts of a number of states have held that exclusionary zoning and, by implication, other RBAHs are unconstitutional. However, until now there has been no organization dedicated to eliminating RBAHs nationwide. The Center (EHI) has taken on that role. For further information, please see the Exclusionary Housing Policies article on this website.

Environmental and energy conservation concerns

Energy and environmental factors demonstrate the need for sufficient affordable housing reasonably close to where people work and obtain services. For example, the world’s petroleum reserves may be effectively exhausted before the end of this century.[29] America’s sprawling residential neighborhoods intensify its reliance on commuting by automobile and on petroleum use. The recent spikes in gasoline prices are just one symptom of our undue reliance on petroleum.

Also, there is “mounting scientific evidence that the release of carbon dioxide and other heat-trapping gases from smokestacks, tailpipes and burning forests has played a central role in raising the average surface temperature of the earth by more than 1 degree Fahrenheit since 1900.”[30] Recently, “business groups have banded together to make unprecedented calls for federal regulation of greenhouse gases,” including those emitted by motor vehicles.[31]

It is crucial from an energy and environmental standpoint, as well as an economic standpoint, to provide sufficient opportunities for Americans generally to access affordable housing within a short commuting distance from their jobs and basic services.

ENDNOTES


[1] U.S. Conference of Mayors, 2008 Status Report on Hunger & Homelessness 19 (2008), available at http://usmayors.org/pressreleases/documents/hungerhomelessnessreport_121208.pdf. “For persons in families, the three most commonly cited causes of homelessness were lack of affordable housing, cited by 72 percent of cities, poverty (52 percent), and unemployment (44 percent). In last year’s survey, the three main causes of family homelessness were cited as lack of affordable housing, poverty and domestic violence.”
[2] Wendy Koch, Homelessness in suburbs, rural areas increases, USA TODAY (July 7, 2009), available at http://www.usatoday.com/news/nation/2009-07-09-homeless_N.htm.
[3] Id.

[4] U.S. Conference of Mayors, 2008 Status Report on Hunger & Homelessness 19 (2008), available at http://usmayors.org/pressreleases/documents/hungerhomelessnessreport_121208.pdf (for 2008, the “top three causes of homelessness among singles were said to be substance abuse, cited by 68 percent of cities, lack of affordable housing (60 percent), and mental illness (48 percent).”

[5] Ian Urbina, Keeping It Secret as the Family Car Becomes a Home, N.Y. Times, April 2, 2006, available at http://www.nytimes.com; Leslie Kaufman, Surge in Homeless Families Sets Off Debate on Cause, N.Y. Times, June 29, 2004, available at http://www.nytimes.com (estimate of homeless children based on widely-cited Urban Institute study that found that at least 1.4 million children and 2 million adults were homeless at some point during 1996). “People remain homeless an average of seven months in the survey cities,” and 87% of those cities report that the average time increased during the last year. United States Conference of Mayors-Sodexho USA Hunger and Homelessness Survey 2005 (“U.S. Mayors 2005”), p. 5, available at www.usmayors.org.

[6] Erik Eckholm, Last Year’s Poverty Rate Was Highest in 12 Years, N.Y. Times, September 11, 2009, available at http://www.nytimes.com (39.8 million residents lived below the poverty line, defined as an income of $22,025 for a family of four). The precision of the official poverty rate has been questioned, because of limitations in its definitions. Id.

[7] Id.

[8] Nat’l Coalition for the Homeless, et al., Foreclosure to Homelessness 2009, p. 8 (2009) (citing Sheila Crowley, et al., Renters in Crisis at 11 (6 of 16 pp.) (2009), available at http://www.nlihc.org/doc/ NLIHC%20Renters%20Briefing%202_20_2009.pdf)..

[9] National Low Income Housing Coalition, Out of Reach 2007-2008 at 7, available at http://www.nlihc. org/oor/oor2008/introduction.pdf.

[10] “The Housing and Urban-Rural Recovery Act of 1983 made the 30% of income standard applicable to all current rental housing assistance programs. This standard has remained in place since.” Id.at 3 and n. 6.

[11] National Low Income Housing Coalition (NLIHC), Out of Reach 2009 at 5 and n. 10, available at http://www.nlihc.org/oor/oor2009/introduction.pdf.

[12] NLIHC, Out of Reach 2009 at 3 and n. 11 (Detroit was the only exception).

[13] Floyd Norris, Job Losses Mount, Enduring and Deep, N.Y. Times, November 14, 2009, available at http://www.nytimes.com.

[14] Id.

[15] David Leonhardt, Broader Measure of U.S. Unemployment Stands at 17.5% , N.Y. Times, November 7, 2009, available at http://www.nytimes.com.

[16] Nonprofit Roundtable of Greater Washington, You Have 10 Days to Move Out, at 2 and n. 3 (June 2008), available at http://www.nonprofitroundtable.org/Home/YouHave 10DaysToMoveOut/ menu-id-1. In 2006, almost 50% of first-lien mortgages on absentee-owned, one- to four-unit rental properties in lower-income minority communities were subprime loans. Joint Ctr. for Housing Studies, Harvard Univ., America’s Rental Housing: The Key to a Balanced National Policy, pp. 2, 14, available at: http://www.jchs.harvard.edu/publications/rental/rh08_americas_rental_housing/index.html. By the end of 2007, nearly 20% of the rash of new foreclosures involved those kinds of properties. Id.at 14.

[17] Renae Merle, Problem mortgages hit new high at 14 percent, Washington Post, November 20, 2009, A17. (the survey has been conducted since 1972).

[18] Id.
[19] National Low Income Housing Coalition (NLIHC), Out of Reach 2009 at 3 and n. 9, available at http://www.nlihc.org/oor/oor2009/introduction.pdf. Foreclosures also “can undermine the stability of already weak neighborhoods by depressing local property values, discouraging investment, and attracting crime.” Joint Ctr. for Housing Studies, Harvard Univ., America’s Rental Housing: The Key to a Balanced National Policy, pp. 2, 14, available at:

http://www.jchs.harvard.edu/publications/rental/rh08_americas_rental_housing/index.html.

[20]Foreclosure to Homelessness 2009 at 8 (citing Sheila Crowley, et al., Renters in Crisis at 11 (6 of 16 pp.) (2009), available at http://www.nlihc.org/doc/NLIHC%20Renters%20Briefing%202_20_2009.pdf.

[21] Nat’l Coalition for the Homeless, et al., Foreclosure to Homelessness 2009, pp. 3, 5 (2009). The vast majority of respondents to the survey provide direct services to people experiencing homelessness (homeless shelters, housing assistance, health care providers, etc.). Id.at 3.

[22] Foreclosure to Homelessness 2009, p. 3.

[23] Id.
[24] Id.In the Washington, DC, region during the third quarter of 2009, 13.9 percent of Maryland borrowers were in delinquency or foreclosure -- up from 9.2 percent during the same period of 2008. The comparable rate for the District of Columbia was 10.3%, up from 7.4% the previous year. The Virginia rate was 9.9%, compared with 7 percent the previous year.
[25] Catherine Rampell, U.S. Economy Began to Grow Again in 3rd Quarter, October 30, 2009, available at http://www.nytimes.com. The official beginning and end of recessions are determined by the National Bureau of Economic Research, which has been known to take a year or more to makes its determinations. Id.
[26] Id.

The government’s cash-for-clunkers program spurred consumers to spend more on durable goods, orders of which grew at an annual rate of 22.3 percent in the third quarter after a decline in the previous quarter. Similarly, the $8,000 federal tax credit for first-time home buyers helped revive housing sales, which rose at an annual rate of 23.4 percent in the third quarter. Housing sales had actually fallen by a comparable amount in the previous three months.

The $787 billion stimulus package, which was passed last winter and is still being distributed, is also credited with strengthening economic activity, although the precise contribution is contested. Many economists worry that the effects of these government initiatives will be short-lived and that the next few quarters may show sluggish growth or even a second dip.

Id.

[27] Joint Ctr. for Housing Studies, Harvard Univ., State of the Nation’s Housing 2007, p. 28, available at http://www.jchs.harvard.edu/publications/markets/son2007/index.htm.

[28] See, e.g., Joseph Gyourko, The Supply Side of Housing Markets, NBER Reporter 2009, No. 2, at p. 10, available at http://www.nber.org/reporter/2009number2/gyourko.html (statistics suggest that local regulation effectively raises housing prices more than 50 percent in some markets on East and West coasts) (citing Edward L. Glaeser and Joseph Gyourko, The Impact of Zoning on Housing Affordability, 9 Econ. Policy Rev. No. 2, pp. 21-39 (Federal Reserve Bank of New York, June 2003), available at: http://www.newyorkfed.org/research/epr/03v09n2/0306glae.pdf.

[29] Jad Mouawad, Barreling Along: The Big Thirst, N. Y. Times, April 20, 2008, available at www.nytimes.com.

Over the past century, the world burned through a trillion barrels of oil. Another 1.2 trillion barrels of known conventional oil reserves wait to tapped, according to BP, one of the world’s biggest oil companies. It sounds like a lot. But given the current rate of growth in demand, a trillion of those barrels will be used up in less than 30 years.

What then? Many analysts estimate another trillion barrels of yet-to-be-found oil remains, but in remote places like the Arctic Ocean where it will be expensive to extract, or in countries that might restrict access.

Id.

[30] New York Times Topics, Global Warming, available at http://topics.nytimes.com/top/news/ science/topics/globalwarming/index.html# (last accessed Nov. 17, 2008).

[31] Id.