Housing affordability for people of modest means has gone from bad to worse. Here are 12 talking points that let the statistics tell the story.
- For households making 30% of area median income, the U.S. only has 37 available and affordable homes per 100 households. At 50% of area median income, there are 60 available and affordable homes per 100 households. At 80% of area median income, there are 94 homes per 100 households.
- In 2019, before the pandemic, 30% of all households paid more than 30% of their income on housing. While 42% of all white renters are cost-burdened, 52% of Latino renters and 54% of Black renters are cost-burdened. More than 30% of Black renters spend more than half of their income on housing.
- 12 of the 20 largest occupations in the country — including home health aides, janitors, and food servers — provide a median wage lower than what is needed for a full-time worker to afford modest rental housing. Factoring in furloughs or reductions in hours and job cuts over the past year, renters may be left with debts they can never pay.
- A key component of the affordability challenge has been stagnation and decline in incomes for lower and middle-income working households. Since 2000, real household incomes have fallen for the bottom 40% of American households, while the middle 20% experienced almost no real household income growth.
- More than half of renters last year worried about their ability to pay the rent. 27% of homeowners and 35% of renters had asked for a housing payment postponement. In 2019, less than 2% of all renter households were threatened with eviction within the previous three months, while in January 2021, even with a federal eviction moratorium in place, almost 10% of renters reported they were behind on rent, and thought it was likely they would be evicted within the next two months.
- The U.S. needs to produce approximately 328,000 new apartment homes every year to keep up with total demand. But the U.S. has only produced that many apartments in one year three times in the past 30 years.
- A key driver of the housing shortfall has been the long-term decline in the construction of entry-level single-family homes and of lower-cost rental apartments. In the late 1970s, nearly half a million new entry-level homes were being built per year. That number has declined every decade so that by 2020 only 65,000 new entry-level homes were completed.
- In any given year, between 120,000 and 240,000 units of affordable rental housing are lost to the affordable housing inventory through the upgrading of the housing to serve higher-income residents, or through decay and demolition.
- Four things limit supply: 1) labor; 2) cost of materials; 3) cost of land (which is largely impacted by the fourth thing), and 4) rules for building or not building. The cost of construction materials and labor grew 57% from 2000 to 2016 — and continues to climb. Last year saw a record high in lumber prices, which have more than doubled since 2020. Land costs almost doubled between 2000 and 2019. The construction industry faces a 200,000-person shortage of skilled trade workers.
- Apartment developers estimate that a two-year approval process can add $2 million to $2.5 million in costs before fees and developer contributions regardless of whether a project is 60 or 600 units. Those costs must be covered by rent or by subsidies.
- Assuming a net monthly income of $2,008 for two adults making minimum wage, the average two-bedroom apartment at fair market rent costs $1,246 a month. The Department of Agriculture’s thrifty food budget for a family of four (two adults and two school-aged children) is $671 per month. Deducting for rent and food, this working family only has $91 a month for transportation, childcare, and all other basic needs.
This data is extracted from “Housing Equity in a Time of Crisis,” the Spring 2021 Ackman Lecture in Real Estate Leadership and Ethics at the Schack Institute of Real Estate New York University, presented by the author Anne Segrest McCulloch who is President and CEO of the Housing Partnership Equity Trust (HPET).