BOSTON MA - Not everybody in the family tree makes it into the family portrait. Most families have ne'er-do-wells; many families crop them out. Housing USA is like a family portrait. We see ourselves as a nation of homeowners or want to be homeowners; and our policies, programs, and rhetoric support that image. The news focuses on the homeownership crisis: foreclosures, toxic loans, mortgage fraud, the "jingle mail" when homeowners, facing foreclosure, send keys to the lender. The major federal housing initiatives (including the Federal Housing Administration, Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System) have helped more than two-thirds of us buy into the American dream. Indeed, a few years ago policy-makers were lauding the nifty subprime mortgages marketed even to buyers with poor credit, enabling even them to own.
What about renters? One-third of all households rent - surely they are part of the American family; but policies, as well as rhetoric, have overlooked them. While the federal government has subsidized some renters (25 percent of eligible households) and the production of some "affordable" units, those subsidies pale beside the forgone tax revenues from the mortgage interest deduction, property tax deduction, and capital gains exclusion.
The media rarely cover the rental crisis. The gap between median income and median rent is growing, leaving many families hard-pressed to afford a lease. But few stories chronicle this gap. It is time to insert renters into the family portrait, in part because there are so many more of them. In 2007, the number of renter households increased by one million or 2.8 percent, compared to an average increase 0.7 percent in the preceding four years.
Disparate groups have fueled the increase. Former owners, who are losing their homes through foreclosure, are now looking to rent. "Would-be buyers," who up to a year ago would have bought homes, are still renting. Today's tight credit restrictions and down payment requirements block them out of the market. Finally, "wait-and-see-ers," who can meet all credit requirements, are staying put, waiting for housing prices to hit a nadir before they sign on the dotted line of a mortgage. All add to the pool of renters.
Renters' prospects are dismal. According to the National Low Income Housing Coalition, in 2007 a family needed to earn $16.31 an hour (three times the minimum wage) to afford a modest two-bedroom apartment. No single minimum wage worker (40 hours, 52 weeks a year) could afford a government "fair market rent" two bedroom unit anywhere in the country. Public subsidies, like Section 8 vouchers, were designed to fill that gap. Today the situation is worse.
Even while the demand is up, the supply of rental housing is down. In 2007 the nation added 169,000 multifamily rental units - one third of the high set in 1986. This marks the fifth straight year of decline. Those units, moreover, are generally geared to the upper end of the market. The supply of "affordable" rental units is dwindling. Since 1995, the nation has lost 1.5 million low-cost units.
Foreclosed multifamily properties, moreover, constitute an additional loss. Typically when a bank forecloses on a multifamily property, those units remain vacant until the home has been sold. It is time to look closely at Rental America. The single strategy, focusing on home ownership, omitted a crucial swath of our citizenry.
We can better the lot of renters. Specifically, we can preserve affordable rental units. We can use foreclosures as an opportunity to increase the supply of rental units. (The recently passed federal housing bill is a step in the right direction.) We can remove local land-use barriers to the construction of affordable housing - especially workforce housing for low wage workers. A balanced housing policy would focus on decent, affordable housing, whether owned or rented. One-third of the nation rents. They belong in our family portrait.
Source: Harvard University