Joint Center for Housing Studies Releases Biennial Rental Housing Report

A record number of renter households face severe affordability problems as rents grow faster than income and as multifamily construction has accelerated to its fastest pace in nearly 30 years but still hasn’t been sufficient to meet surging demand, according to a recently released report from Harvard University’s Joint Center for Housing Studies entitled “America’s Rental Housing: Expanding Options for Diverse and Growing Demand.” Rental vacancy rates are now at their lowest point since 1985 and inflation-adjusted rents are rising 3.5 percent annually.

With renter incomes stagnant, the report found that last year was another record-setting year in the number of renters paying more than 30 percent of their income on housing costs. While lower-income households are most likely to experience these cost burdens, the report finds that rental cost burdens increasingly afflict even moderate-income renters earning as much as $45,000 per year.

The study identifies the LIHTC program as the primary source for additions to the affordable rental stock. The LIHTC program provides 9 percent tax credits, which are allocated annually based on population to state housing finance agencies, and 4 percent credits, which are used to support developments with tax-exempt bond financing.

Because LIHTC credits are a tax expenditure, the program doesn’t require annual appropriations from Congress. Real tax expenditures for the program have thus risen modestly since 2008, reaching close to an estimated $8 billion in 2015. With these credits, an average of 76,200 new affordable rental units were placed in service each year from 2009 to 2013. Assuming that the trend continued in 2014, the LIHTC program will have helped add or preserve a total of more than 2.2 million subsidized units since its inception in 1986.

Given that maximum rents for most LIHTC units must be affordable to households with incomes at 60 percent of area median income (AMI), the study cited that renters with lower incomes must either pay more than 30 percent of their incomes for housing or receive an additional form of subsidy. Based on data in 10 states, a study by New York University’s Furman Center and the University of Massachusetts Boston found that about half of LIHTC-eligible units received additional rental assistance. In 2009–2010, 78 percent of LIHTC renters who received additional subsidies had incomes at or below 30 percent of AMI.

The study advocates allowing income-averaging for LIHTC sites. The idea is to balance units for extremely low-income tenants with a few homes for slightly higher-income tenants. This way, there would be more affordable housing for those who need it the most by not only providing deeper subsidies for households with extremely low incomes, but also encouraging development of sites serving renters with a broader mix of incomes.

Some states and localities have programs for rental assistance and affordable housing production and preservation that supplement federal support. Inclusionary zoning, housing trust funds, and other local approaches provide promising models for cities facing rental affordability issues. But like federal programs, these efforts haven’t reached a scale sufficient to close the gap between assistance and need, says the report.