The continuing crisis in affordable housing: systemic issues requiring systemic solutions.

• Author: Williams, Paulette J.

1. INTRODUCTION

   In 1960, my father bought the first home he ever owned. He was forty years old, with one child away at college and two still in high school. As a career military man, my father picked up his family every two or three years and moved lock, stock, and barrel to a totally new location. Until he first bought a house, our family had lived in rented houses, sometimes on military bases. He bought his first house in Manchester, New Hampshire, because there was no housing available on base, and very little rental housing was available in town. Buying the house was not part of a long-term strategy; we simply needed a place to live, and this house was what he found. (1)

   My father bought his second house under similar circumstances. (2) He had been transferred to Langley Air Force Base in Hampton, Virginia, and he moved into temporary housing for thirty days. Again, he was looking for housing, and did not care whether he ended up with a rental or a purchase. He bought the house he now lives in for $32,950 in 1972. My father put down 5% and obtained an FHA mortgage at 7% for thirty years. (3) The four bedroom, two and a half bath home is in a nice neighborhood, and he has taken good care of it. It is now worth over $150,000. Even today, my father has trouble thinking of himself as owning an asset that is worth over $100,000, because that sounds like "an awful lot of money" to him. (4)

   As it is for most Americans, (5) my father's house is his major asset. Unlike many Americans, however, my father is not buried under a mountain of debt. (6) Not only has he managed to pay off the mortgage on his house, but he has resisted the many offers that he gets to take out home equity loans, and he pays off the one credit card that he uses every month. My father is not wealthy, although he shares a lot of values in common with the true millionaires described in Stanley and Danko's The Millionaire Next Door. (7) Although all of his income is from his military pension and social security, he has a level of economic security that is surprisingly rare in this rich country.

   This story about my father provides some important lessons about economic security, and suggests that homeownership plays an important role in achieving economic security for American families. Homeownership has played an important role for many middle-class people in achieving economic security, (8) and I argue in this article that it can do the same for people in poverty.

   Since 1937, when the first federal legislation was enacted to provide housing for low income people, (9) there has been an acknowledged crisis in affordable housing. (10) The number of people in need of housing and unable to afford it through the private market system has continued to outstrip the number of housing units available to this population. (11) The federal government has enacted a range of programs, generally implemented through state or local housing agencies, to address the crisis. (12) In this article, I survey the affordable housing programs and closely examine a few of the most important ones, considering how successful each program has been in achieving its objectives, and in that process, assessing what role each program plays in our national housing policy. (13)

   The government housing programs are aimed at people who have incomes that are significantly less than the median income in the area where they live. (14) Although my father is not poor, (15) and he was not a beneficiary of the affordable housing programs for poor and low income people discussed in this article, (16) in the final analysis, as I consider what we need to do to address the crisis in affordable housing in this country, I nonetheless return to this story of my father. (17) I believe that his story is relevant to the discussion of the housing crisis, because we will solve the problem only when we are able to collectively learn the important lessons about economic security that my father has learned, and only when we commit ourselves to making those lessons available to low income people. (18) The concepts of poverty and economic security are more psychological than they are financial. (19) In this and subsequent articles on the topic of wealth and poverty, I will examine the characteristics that led my father to have a sense of economic security, and the characteristics that lead others with similar levels of income and resources to economic despair. (20) This article examines the government programs which have been designed to provide housing to low income people. (21) The main focus of the article is a comparison between the programs designed to provide rental housing and programs designed to promote homeownership.

   I am primarily concerned with determining which of the existing programs do the best job of promoting economic security among the population they are designed to benefit. Therefore, I measure the success of a housing program by whether it promotes economic security. Nonetheless, in the course of this discussion, I will consider other definitions of success and how the programs measure up against them. Part II presents a framework for a discussion of affordable housing policy issues. (22) In this section, I outline the complex environment of affordable housing development, and the multiple interests that need to be involved in developing any coherent policy.

   Part III gives a short history of public housing policies from 1937 to the end of the twentieth century. (23) Part IV discusses the major rental housing programs. (24) The public housing program discussed in Part III is briefly assessed here, (25) as are the HOPE VI, (26) Section 8, (27) Welfare Reform, (28) and Low Income Housing Tax Credits (29) programs. This section contains a discussion of the relationship between affordable housing and welfare reform, because the public policy of encouraging the poor to become self-sufficient, both in financial and housing terms, has been a driving force in the development of affordable housing policy. (30)

   Part V describes programs designed to promote homeownership for low income families. (31) These include Mixed-Financed Development programs, (32) HOPE VI, (33) Non-profit and Community-based Developments, (34) and Low Income Homeownership initiatives. (35)

   In Part VI, I draw conclusions based on this comparative analysis and make a recommendation for the direction affordable housing policy should take. (36) I conclude that what we do not have, and what we need, is a National Affordable Housing Policy, with a clearly defined mission, accountable to multiple interests and taking into account a variety of measures of success. (37) To fulfill its mission the responsible entities will need the resources, expertise, and power to get the job done.

   Finally, the Appendix of Affordable Housing Statutes is a quick reference guide to the major statutes in this area. (38)

2. THE AFFORDABLE HOUSING ENVIRONMENT

   1. The Scope of the Crisis.

      The United States has been in the midst of an affordable housing crisis for many years. (39) What exactly is meant by the "affordable housing crisis" depends on who is discussing the question, and the specific context of the discussion. (40) In this section, I provide an overview of the crisis from a variety of perspectives.

      Affordable housing refers to housing intended for "low income" or "very low income" people. (41) In the year 2000, the average annual income of the households in the bottom 20% of U.S. households was $10,500. (42) The 1990s were a period of unprecedented growth in the United States economy; (43) the lowest 20% of households, however, saw almost no gains in income since 1975. (44)

      The problem of housing affordability can be seen by looking at the high percentage of low income households who pay a disproportionate share of their incomes (more than 30% by some measures; more than 50% by others) for housing. (45) Of the 20 million lowest income households, over 24% pay between 30% and 50% of their incomes for housing and/or live in inadequate housing. (46) Most of the 7.2 million of the lowest income households pay more than half of their incomes for housing. (47)

      It is a serious problem that the quality of housing available to low income people is generally substandard. (48) Reports of the deplorable housing conditions suffered by the urban poor date back to the late nineteenth century. (49) In 1992, the National Commission on Severely Distressed Public Housing found that approximately 6%, or 86,000 units of public housing, were severely distressed. (50) A complaint frequently made about public housing units is that they are not well maintained by the local public housing authorities, and that they are crime-ridden, unhealthy environments. (51) As a result, many of the people for whom the housing was intended refuse to live there, and thousands of public housing units stand vacant and uninhabitable. (52) Fourteen percent of the housing occupied by lower income families is structurally inadequate or overcrowded. (53) The existence of these conditions of distress in combination with inadequate housing illustrates the complexity of the problem. Housing alone will not solve the problem. Any effective solution must address the other concerns as well.

      Another way to view the crisis is to note the disparity between the supply of low cost housing units and the number of low income households. (54) Only 9.1 million units rent for less than $4,800 per year, (55) or nearly half the income of the average household in the lowest income group. (56) Yet, there are over 10.3 million lowest-income renter households, and only 4.7 million of them are able to secure those low rent units. (57) There is also a significant disparity between the number of new affordable units produced each year and the increasing number of households in the low income category. (58) Waiting lists for public housing or for vouchers for subsidized housing are extremely long. (59)...