Why Building More Homes Can’t Solve the Housing Affordability Problem

Published by Market Watch | November 17, 2021

Even before 2020, the U.S. faced an acute housing affordability crisis.

The COVID-19 pandemic made it a whole lot worse after millions of people who lost their jobs fell behind on rent. While eviction bans forestalled mass homelessness—and emergency rental assistance has helped some—most moratoriums have now been lifted, putting a lot of people at risk of losing their homes.

One solution pushed by the White Housestate and local lawmakers and many others is to increase the supply of affordable housing, such as by reforming zoning and other land-use regulations.

As experts on housing policy, we agree that increasing the supply of homes is necessary in areas with rapidly rising housing costs. But this won’t, by itself, make a significant dent in the country’s affordability problems—especially for those with the most severe needs.

In part that’s because in much of the country, there is actually no shortage of rental housing. The problem is that millions of people lack the income to afford what’s on the market.

Where the crisis hits hardest

Renters with the most severe affordability problems have extremely low incomes.

Nationally, about 45% of all renter households spend more than 30% of their pretax income on rent—the widely recognized threshold of affordability. About half of these renters, 9.7 million in total, spend more than 50% of their income on housing, greatly impairing their ability to meet other basic needs and putting them at risk of becoming homeless.

Nearly two-thirds of renters paying at least half of their income on housing earn less than $20,000, which is below the poverty line for a family of three. Renters with somewhat higher incomes also struggle with housing affordability, but the problem is most pervasive and most severe among very-low income households.

For a household earning $20,000, $500 per month is the highest affordable rent, assuming the affordability standard of spending no more than 30% of income on housing. In contrast, the median rent in the U.S. in 2019 was $1,097, a level that’s affordable to households earning no less than $43,880.

And homes that rent for $500 or less are exceedingly scarce. Fewer than 10% of all occupied and vacant housing units rent for that price, and 31% are occupied by households earning more than $20,000, pushing low-income renters into housing they cannot afford.

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