The Unstable Condition: What the pandemic can teach us about the need for more affordable rental housing

America’s rental housing system is broken. For anyone living in high-cost, high-density areas like New York or Los Angeles, the increasing influx of pencil towers and luxury apartment complexes serves as a daily visual reminder of the profit-driven nature of the industry. But as rising rents outstrip income growth and demand continues to outpace supply from urban to rural areas nationwide, the affordability crisis affects all but the highest-income renters. America’s Rental Housing 2020, published by the Joint Center for Housing Studies (JCHS) last month, outlines a rental economy that is struggling to keep up with the increased demand from middle- and high-income renters, even as the situation grows increasingly dire for low-income households.

Of the country’s approximately 43 million renters nearly half are already considered “cost burdened,” spending more than 30 percent of their income on housing and utilities according to US Census data. Hundreds of thousands of new units are entering the market as rental construction hits an all-time high, but only 12 percent of newly built apartments had an asking rent below $1,050 in 2019. As more high- and middle-income renters flood the market, the current stock available for low-income renters is dwindling. Only 37 in 100 units affordable for extremely low-income households are available, according to a 2019 study by the National Low Income Housing Coalition (NLIHC). Averaging 43 years old, existing low-cost rental stock is rapidly falling into disrepair. Other lower-quality units are being acquired by corporations and upgraded into luxury units to suit market demand.

Some 860,000 renters were threatened with eviction in 2017; low-income minority households are more than twice as likely to be threatened than their white counterparts, and seven times as likely than high-income white renters. More than 26 million unemployment claims were filed in the US in the past month due to COVID-19; hundreds of thousands of jobless renters will soon face eviction, with many more to come. “Prior to COVID, there was already a shortage of 70 million rental homes available to those living below the poverty line,” explains Andrew Aurand, vice president of research at NLIHC. “Many families are at high risk of housing instability because one crisis can put them out of their homes—and now we’re in the middle of it.”

On any given night in the US, over half a million people are homeless; over 150,000 are in California alone. NIMBYism and outdated zoning policies make building high-density, genuinely affordable housing impossible in the areas that need it most. “Affordable” housing can cost more than $1 million per apartment in California. How did we get here? In the face of the COVID pandemic, what can be done to provide immediate relief for families facing eviction as well as to effect long-term change?

Despite the recent market slowdown, construction continues to boom, but it’s focused almost exclusively on high-end developments. A full 75 percent of the total increase in renters from 2010 to 2018 constituted high-earning households making upwards of $75,000. The JCHS report reveals that rich renters are getting richer—income disparity between highest and lowest income renters has grown from 12 times to 18 times in the last 30 years. This suggests that 30- to 40-year-olds who would typically buy their first house at this time are remaining in the rental market, while low-income renters are increasingly moving in with their parents or entering roommate situations.

Newly completed apartments with 50 or more units—the typology with the highest rents—increased from 11 percent of the housing stock in the 1990s to 61 percent in 2018. Air-conditioning, laundry, and other amenities have become requisite, and the majority of these new-build rentals are cropping up in city centers (in 2017, 41 percent of occupied rentals were located in dense metropolitan areas). As a result, rent is skyrocketing: the average rental fee asked by new units in 2019 was 37 percent higher in real terms than units completed in 2000. “Market construction is answering to increased demand from high-income renters,” says Daniel McCue, senior research assistant at the Joint Center. “But if this influx of high-earning renters is pulling up the median, then the median is measuring different kinds of housing over time; this can eclipse what happens to the low-income renters.”

Developers cite high construction costs, a shortage of construction workers, and constrictive zoning regulations as factors that prevent them from building genuinely affordable housing. Commercial land has doubled in market price from 2012 to 2019, while the costs of labor, materials, and local taxes have increased by 38 percent in that same period. Planning permission for new housing takes the longest in the areas that need it the most. In New York, Seattle, and San Francisco, it can take a year, often more; costs balloon while in limbo. In one extreme case in Solana Beach, California, an affordable development of 18 units costing just over $400,000 each, swelled to almost $1,100,000 per unit in the decade it was stuck in planning purgatory.

While new-build rental housing is pivoting toward rich renters, the affordable rental housing stock already on the market is shrinking. Increasingly, corporations are buying up affordable housing and upgrading the units to increase rent. Individual ownership of affordable housing has dropped from two-thirds to two-fifths between 2001 and 2015, with large corporations acquiring the bulk of such properties. To give an example, the private equity firm Blackstone LLC has spent $9.6 billion since 2008 (or $100 million a week, according to a Financial Times estimate) hoovering up properties around the US to flip as luxury rentals (they own an estimated 1,000 properties in LA alone). Improvement spending is up 200 percent from 2010 to 2018, while the Federal Reserve estimates that essential repairs on rental properties is backlogged by $45 billion.

The dwindling supply and continued degradation of low-cost rentals means low-income renters—the lowest-earning, least mobile, and most ethnically diverse group—are even more vulnerable in the new stakes of the market. Low-rent housing declined to 8 percent of the total rental housing stock from 2012 to 2018, with the largest decline in areas of the country typically considered affordable, such as the Midwest. HUD rental assistance programs can only help one in four low-income households; the average assisted household lives on just $14,000 a year. With an estimated $400 per month after rent to spend on food, medical care, and transport to work, extremely low-income renter households (earning <$15,000 a year) increasingly go hungry or neglect health crises as rents continue to increase. And with the pandemic, it’s set to get worse. “For the large percentage of cost-burdened renters who work in at-risk industries like service, retail, and transportation, their situation will only worsen in the pandemic’s economic downtown—which will likely be characterized as a services recession,” says Whitney Airgood-Obrycki, a research associate at the Joint Center and the lead author of America’s Rental Housing 2020.

A systematic lack of federal support for renters has created a housing market that routinely favors white homeowners over minority renters. Minorities and immigrants make up the bulk demand of renting; the Joint Center report reveals that minorities made up 76 percent of renter household growth between 2004 and 2018. “Renters, who make on average half of what homeowners make, are poorer and more financially vulnerable than homeowners,” explains Jenny Schuetz, a fellow at the Metropolitan Policy Program at the Brookings Institution. “The median white household owns their home, while the median black and Latino family rents. The United States spends a lot more resources subsidizing wealthy, white homeowners than minority renters.”

As mobility rates hit an all-time low, rental deserts further enforce the ethnic segregation that’s endemic to the rental housing affordability crisis. In nearly a third of the nation’s census tracts, less than 20 percent of all housing was renter occupied or available for rent in 2017. These so-called rental deserts exist largely in low-density metro areas (53 percent) and non-metro areas (43 percent). Due to limited rental options, an estimated 2 million low-income renters living in rural communities are subject to overcrowding or homes that lack kitchens or plumbing.

Rental deserts further enforce segregation along race/ethnicity and class lines. The Joint Center’s report reveals the median income in rental deserts to be $71,000 versus $49,000 in all other areas; the population of communities with little to no rental housing is 78 percent white. “There’s this false idea that renters should just move to where they can find an affordable home, but for some proportion of our population, there’s nowhere that’s affordable,” says Aurand. “Some of it comes down to stereotypes of low-income renters, which are often racially biased.”

Furthermore, evictions and homelessness are on the rise. According to the American Housing Survey, 2 percent of renters in 2017 were threatened with eviction. A disproportionately high number of threats are issued to very low income and minority households. The threat is double for black households making less than $30,000 a year, and nearly triple for black households making $30,000–$45,000 a year compared to white households in the same income bracket, according to the Joint Center’s report. When a family experiences a shock that deprives them of housing, it triggers a whole domino effect of additional expenses: jobs are lost and children drop out of school, which ultimately results in a higher public expen\diture than proactive support. “It is so much better to provide them with immediate assistance for a couple of months, which doesn’t disrupt school or work,” says Aurand, who argues an emergency rental assistance program is necessary to weather the effects of COVID and beyond.

These stresses on renters will intensify as the effects of climate change multiply. The Joint Center estimates that 8 percent of renters do not have the resources to evacuate in the event of a natural disaster. As 2.4 million rental units are located near a 100-year flood plain (not accounting for sea level rise), disaster-related displacement will only increase in the coming years, as such disasters become more frequent. The number of billion-dollar disasters in the US more than doubled from 2000 to 2018, while the average national cost of damage is $101 billion. More than 324,000 renters were displaced by natural disasters in 2015–2017, but federal help still remains largely focused on homeowners. In 2017, the government provided $35 billion of disaster relief to homeowners, yet barely $1 billion to renters. Insurance for renters is equally skimpy: only 5 percent of National Flood Insurance Program policies were aimed at people living in multifamily buildings in 2019.

With the odds stacked so plainly against low-income renters even as the affordability crisis spreads up the socioeconomic ladder, what will be the knock-on effect of this pandemic? Will it reveal the unsustainable conditions of the current rental housing market, as millions of now jobless cost-burdened renters face evictions? What measures must be in place to mitigate the damage of COVID while preparing for future public health crises? And what can it teach us about the need and means to develop more affordable rental housing?

The immediate problem at hand is trying to prevent evictions. So far, some states and cities like New York have issued three-month eviction moratoriums, which essentially pause rent payments for the next 90 days. But the practicality of the program, without additional financial support from the government, is being rightly criticized. “If I’m a low-income renter struggling to make a month of rent, and I hit the end of a three-month moratorium, how am I going to come up with three months worth of rent?” asks Airgood-Obrycki.

Other ideas on the table include rent freezes so landlords can’t raise the rent in the middle of the crisis, or boycotting rent payments altogether. But not paying rent means a landlord’s mortgage servicers can’t get paid, which spirals up into shortages at the state and federal levels. The COVID-19 pandemic has also revealed the weak points of the country’s $10 trillion-plus mortgage system. In this uniquely American housing crisis—a need-turned-enterprise backed by large investors and banks as much as by federal mortgage suppliers like Fannie Mae and Freddie Mac (which also subsidize over 38 percent of the commercial mortgage market)—how will our housing finance system emerge from this mess? Who will be held responsible, and will it involve another bailout of private sector companies from the consequences of their own actions, as Don Layton, senior industry fellow at the Joint Center, cautions against?

In the face of a very possible new wave of evictions after the moratoriums are lifted, we need to place more money in emergency housing assistance programs now. A $4 billion injection into the Emergency Solutions Grant (ESG) program, part of a $12 billion funding package for HUD programs covered by the COVID-19 bill, secured significant resources for homelessness assistance. But it is not enough. ESG needs additional financial resources as well as designated space to shelter the homeless. A temporary voucher through Housing Choice would enable homeless Americans to get themselves off the streets in the peak of this pandemic, allowing them to self-isolate as per government regulations.

Beyond the current pandemic, the long-term solution for more affordable housing is twofold. To help low-income renters access affordable housing, we need more funding for federal programs with a proven track record. We also need stronger state regulations to build much, much more of it.

“We know what solves people experiencing housing instability, we just don’t adequately invest in those solutions. This pandemic has really highlighted that,” says Andrew Aurand, who cites the Housing Choice Voucher Program, the National Housing Trust Fund, and the Low Income Housing Tax Credit (LIHTC) as three key programs essential to low-income rental support. The LIHTC is the primary federal mechanism for adding and preserving affordable rental houses. Since 1986, they’ve supported the construction and redevelopment of 2.5 million units to households making 50-60 percent median income—though this remains unaffordable for the very low-income renters comprising half their tenants. In a rental market where only one in four eligible low-income households gets assistance, federal funding for these programs needs to be drastically increased. NLIHC estimates $100 billion, or $9,700 per year per household, could secure extremely low-income and cost-burdened renters in their housing for 12 months. This needs to be done in tandem with more expansive measures taken by state governments to support the development of more affordable housing stock.

Some states are introducing new initiatives like inclusionary zoning which are meant to incentivize developers to make a certain percentage of units affordable. Others are trying to introduce modular prefabricated housing (like this five-floor, 110-unit apartment building in Oakland that was constructed in just ten days), and reducing setback rules or parking requirements in order to bring down costs and speed up construction. But such strategies have a checkered history, resulting in substandard houses. Furthermore, they will not put a stop to NIMBYism among affluent suburbs blocking construction of affordable housing, reduce social biases against renters, or satisfy the financial interests of developers. We should be looking toward new state-led development policies over local incentives. “State governments preempt local government power, so they could be a lot more effective here,” argues Schuetz.

City- and state-wide zoning reform initiatives led by Minneapolis last autumn and followed by Oregon earlier this year are a breakthrough. In both areas, single-family-home zoning was banned and the construction of new multifamily developments now requires no approval process. Similar movements are a possibility in other states including Washington, Minnesota, and Virginia. Another strategy is to legalize gentle-density, a type of attached, ground-oriented housing built for two to four families to occupy, seen in cities like Chicago. “It’s not going to solve all our problems,” says Schuetz, “But at least it gets people comfortable with the idea that detached single-family housing doesn’t have to be the norm.”

America’s rental housing market has long been on edge, with the right to housing becoming a privilege as the rental market grows increasingly unregulated and decentralized. But COVID-19 has thrown that instability into grand relief, with millions Americans out of work, and hundreds of thousands likely to face eviction in the coming months. A top-heavy market catering to a new influx of rich renters makes the living situation of low-income renters even more precarious, as affordable rental stock deteriorates or is converted into high-rent units. Moreover, at a time when nearly half of renters are considered “cost-burdened,” and low mobility rates creep into the middle class, it’s clear that no amount of subsidized private housing will suffice.

State governments must end single-family zoning to enable the construction of low-cost multifamily rental housing nationwide. The federal government needs to provide increased financial assistance to existing programs that support low-income renters, and work alongside state leaders to ensure all cost-burdened renters can remain in their homes in the event of future pandemics or natural disasters. It’s time for national politics to acknowledge the full scope of the rental housing crisis, and for candidates to develop responsive housing proposals that raise public awareness of these issues. And despite the many challenges ahead, it’s also important to note where this is already happening. “Prior to this crisis, Democratic candidates were discussing this problem at a scale and momentum we haven’t seen in decades,” suggests Aurand. “COVID is highlighting this need to work together even more; it’s showing all sectors—from healthcare, to education and civil rights—how crucial housing is to sustain everything else.”

(Published on: Harvard Design Magazine )