Affordable Housing Shortage
The number of renter households grows and multifamily construction continues to be robust, but the lack of designated affordable housing remains a pressing issue for the multifamily industry. Strong absorption of market-rate apartments continues to place pressure on households that must rely on affordable housing. More specifically, latest data from the American Housing Survey indicate households with extremely low incomes (30% of area median income and less) are feeling the most stress, as this group has grown faster than the supply of designated affordable product entering the market and higher income households have more choices in terms of location and product class in local apartment markets.
Data from HUD’s Worst Case Needs report, an annual report to Congress addressing issues in the affordable housing market, illustrates the ratio of apartment product in the lowest income segment is the most strained in terms of access to multifamily product – where key limitations include price as well as location in individual markets. In the graph, any level above 1.0 indicates there are more renter households than affordable apartment units for each income cohort. These are at a macro level, as local apartment markets behave differently. From 2001 through 2013, the extremely low income segment has grown 27.7% to 11.2 million renter households, well above other lower income and middle-income renter segments. While all other income segments have experienced some growth, the ratios to the number of affordable units have remained below 1.0 during the same time, indicating the supply issue is largely felt in the extremely low income segment.
Market-rate rent and income estimations for the extremely low income household segment also highlight the necessity for housing assistance at the lowest end of the market. Recent data from MPF Research show average rent at $1,247 across top 100 markets as of 3Q 2015. As of 2014, U.S. median income is $52,250 per Census data. Using the definition for extremely low income of 30% of median income or less, this translates to a maximum household income of $15,675 at a national level. The gap in affordability of market-rate rent and extremely low income households are most vulnerable, unable to afford market-rate rent, are most dependent on housing programs and subsidies and have fewer choices when it comes to location and access to economic opportunity. At a high level, this illustrates the continuing need for national, state and local housing associations and organizations to focus on strategies to address access to housing subsidies and vouchers to those households most.