Housing insecurity in the United States long predates the COVID-19 pandemic. Current challenges most recently appeared in the wake of the Great Recession, which lasted from 2007 to 2009, as demand for housing increased while the supply of new housing units plummeted. People were squeezed out of the housing market, adding upward pressure on demand for rental properties. Those with deeper pockets—higher incomes and more wealth—can afford higher rents if they do not buy, leaving lower-income renters to fight over an insufficient pool of available rental housing.
In January 2019, the United States had a shortage of 7 million affordable homes for low-income renters,1 resulting in only 37 affordable rental homes for every 100 low-income renter households.2 Due to these market pressures, the most economically vulnerable suffered the highest housing precarity. As a result, millions of Americans have experienced eviction, homelessness, and housing insecurity, each of which leads to financial insecurity, toxic stress, poor health outcomes,3 poor academic achievement for children,4 food insecurity,5 and other negative outcomes.
For decades, policies to address the complexities of the affordable housing crisis, such as rental assistance, have been underfunded, deferred, and inadequate.6 In May 2022, the Biden-Harris administration released the Housing Supply Action Plan,7 which aims to address the rising cost of rent and the affordable housing shortage through comprehensive short- and long-term housing investments that focus on increasing the supply of available housing—particularly for low- and middle-income people. This issue brief offers policy solutions that build upon the administration’s federal housing supply plan to ensure equitable housing for all households by:
- Boosting the supply of affordable rental units in opportunity-rich neighborhoods.
- Increasing housing voucher subsidies to ensure households receive the help they need in a timely manner.
- Expanding renter protections so that those who have housing do not lose it, as eviction is often the catalyst for further economic instability.
Housing affordability and stock do not meet demand
The housing affordability crisis is the result of deliberate policy choices and chronic underfunding that have persisted for decades but have worsened since the Great Recession.8
Often, homeownership is the preferred housing choice for American families because it builds wealth. Homeownership provides homeowners and their families financial security and locked-in, predictable monthly costs and assets that support equity and can be passed down through generations, assuming homeowners are able to make mortgage payments and home values rise. Homeownership is also favored by U.S. policies. Tax benefits for homeowners include:
- Owners are not required to pay taxes on imputed rental income; essentially, homeowners act as both landlord and renter. They are able to make deductions on their property investment, which is discussed more below, and they are not taxed on the investment itself.
- Owners may deduct mortgage interest and property tax payments from their federal income tax if their deductions are itemized.
- When filing their taxes, homeowners are allowed to exclude part of their financial gains that result from selling their home.9
It is worth noting that these benefits are valuable to high-income households but not low-income households, further exacerbating economic inequality.
New housing supply fell dramatically after the Great Recession
A decline in new housing after the housing crash of the Great Recession squeezed many would-be homebuyers out of the market. These households were then forced to remain in the rental market, adding upward pressure to rental prices while driving those with less income and less wealth into more insecure and unstable rental housing. The supply of new housing cratered after the 2007–2009 housing crisis and only very slowly recovered. This is apparent in the number of units where construction was started but not completed.
This drop in supply was sharpest after the Great Recession. Authorizations of single-family units as well as multifamily units, which are defined as buildings with five or more units, fell in the aftermath of the housing crash. Most importantly, the years immediately following the Great Recession—2010 and 2011—saw a dearth of new multifamily building constructions. For several months, units with initiated construction dropped to 30,000—the lowest amount on record dating back to 1968. (see Figure 1) Importantly, this decline followed modest levels of initiated construction of multifamily buildings before the Great Recession. This lull made a bad situation worse and exacerbated the shortage of housing supply even while demand increased.
Without added supply, vacancies fell by the 2020s
The number of new single-family and multifamily buildings where construction had started grew during the past decade. However, construction has not kept pace with the rise in demand, as reflected in falling vacancy rates. Vacancy rates show the shares of rental and housing units that are readily available. Both have fallen sharply since the Great Recession, alongside the decreasing supply. (see Figure 2) Homeownership vacancies dropped to less than 1 percent for three financial quarters in 2021, the lowest consistent level since 1957. (see Figure 2) Without vacant homes, many would-be homeowners could not buy a new house and either stayed in their existing house, further reducing the housing supply, or entered the rental market and subsequently increased the demand for rental housing. Consequently, rental vacancies fell to less than 6 percent in the second half of 2021, the lowest level since 1984. Historically, low rental vacancy rates make it much harder for families to find an affordable housing option, as demand outpacing supply drives up prices to ever-higher levels.
Rental costs have increased dramatically
For more than a decade, rental costs consistently have gone up faster than the costs of owning a house. Figure 3 shows yearly rental price inflation and the equivalent inflation measure for homeowners. Since late 2006, when the housing bubble started to burst, through January 2021, rents have gone up faster than prices for homeowners. Early on in that period, both rents and house prices rose modestly as the country grappled with the fallout from the housing crisis. However, housing costs for both homeowners and renters have gained steam since mid-2010. Moreover, rents and homeowners’ costs quickly shot up again after a drop at the start of the pandemic in early 2020. (see Figure 3) The recent rise in rental inflation is thus largely a return to and even an exacerbation of the pre-pandemic situation, as the pre-pandemic levels of housing supply did not meet the needs of many low-income renters.
Rental costs have increased across the country during the pandemic. Virtually all areas of the United States experienced an acceleration in rental prices from the first part of the pandemic—May 2020 to May 2021—to the latter part—May 2021 to May 2022. (see Figure 4) Prices rose especially sharply in areas of the South Atlantic such as Miami; Tampa, Florida; and Atlanta. (see Figure 4) Few areas experienced price increases of less than 3 percent—roughly the long-term average price increase—in both years. (see Figure 4) A price increase above this long-term average suggests higher-than-usual rental prices. Moreover, even where rental inflation stayed relatively low, it accelerated as the pandemic eased.10
Millions of Americans are cost-burdened by rent
Rising rents compound the overall financial insecurity of many households. The Department of Housing and Urban Development (HUD) defines a cost-burdened household as one that spends more than 30 percent of its income on housing costs. In 2019, 20.4 million renter households were cost-burdened.11
The onslaught of pandemic-related job losses, rising health care costs, and increased cost of necessities due to inflation and supply chain issues likely worsened the outlook for many renters. The Board of Governors of the Federal Reserve System projected rent increases of an additional 10 percent in 2022, meaning that millions of Americans will be pushed toward housing insecurity and even homelessness as housing costs become untenable.12
The pain of rising rents and the associated financial insecurity is unevenly distributed across demographic characteristics. Many Black, Latino, and Asian renters regularly face discrimination when trying to rent an apartment or a house. They are kept out of some rental places altogether, steered instead toward lower-quality housing, and they pay higher rents and fees than similarly situated white renters.13 Housing insecurity also disproportionately affects single parents, individuals with disabilities, older adults, LGBTQ people, and people with multiple or intersecting identities.14
Federal investments helped stabilize the housing crisis during the worst part of the pandemic
The COVID-19 pandemic and subsequent economic fallout succeeded in shining a harsh light on the ongoing housing crisis. Key investments by the Biden administration during the worst of the pandemic helped mitigate some housing insecurity, but those were temporary fixes. For example, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 included a 120-day federal eviction moratorium that helped keep people in their homes during the public health crisis.15 The U.S. Supreme Court made the decision to end the moratorium on August 21, 2021.16 The CARES Act also provided emergency rental assistance to households that were not able to make rental payments or other rental-related fees, such as security deposits, apartment applications, and late fees. Furthermore, in March 2021, Congress passed the American Rescue Plan (ARP) Act, which bolstered the CARES Act through emergency rental assistance, housing vouchers, homelessness assistance programs, homeowner assistance, utilities assistance, housing counseling, and fair housing activities. More than 80 percent of the Emergency Rental Assistance funds have reached vulnerable communities, helping very low-income households remain in their homes.17
While these pandemic-related responses led to a more equitable housing recovery, they are a drop in the bucket in comparison to the centuries of segregation and disinvestment in low-income communities of color. Therefore, more action is needed to ensure that investments in housing also focus on long-term solutions that ensure affordable, quality, and safe housing in opportunity-rich areas and create robust renter protections for all Americans.
Renters can benefit from greater supply, increased subsidies, and more protections
The housing crisis requires more affordable rental housing as well as protection for low-income people. The federal government has a plethora of programs and resources at its disposal dedicated to housing security and economic mobility. The administration and Congress have several tools available to help struggling renters. They can increase the supply of affordable and accessible housing while also providing housing allowances to those who need them, particularly low-income households and other marginalized people, and protect tenants facing evictions, thus increasing overall housing security for renters.18 Such policies can specifically include the recommendations made in the following subsections.
Increase the supply of affordable rental units
Increased funding for affordable housing construction is a key requisite for boosting supply. Market forces alone will be insufficient to address the shortage of affordable housing units. In May, the Biden administration announced the Housing Supply Action Plan19 to ease the burden of housing costs by boosting the supply of quality housing nationwide. The plan pertains to both rental housing and homeownership. In the next three years, this plan aims to create and preserve thousands of new units for low- and moderate-income families.
In essence, policymakers can address the rental crisis on the supply side in two ways. First, they can increase the total number of rental units, which can help slow rental inflation as more renters find the housing that they want. Second, they can focus on building housing units slated for lower-income renters. This increases supply, especially for those struggling the most to find affordable, stable, and secure housing. Another avenue is through reforming and strengthening the Low-Income Housing Tax Credit (LIHTC) program, created to address the mismatch between housing supply and relentless demand, incentivize the production of affordable units, and ensure that those units remain affordable in the long run. It would be beneficial to increase program credits and eliminate the income average provision that allows LIHTC-receiving owners to charge higher rents to households above 60 percent of the area’s median income.20 Currently, to participate in the LIHTC program, owners must rent at below-market rates for 30 years—only 15 of which are the “compliance period,” during which tax credits that have gone to developers can be taken away if the developers do not comply with LIHTC regulations. To maintain affordability, limitations on rental rates could be mandated—and enforced—beyond the current period.
At the state level, policymakers should create and enforce state mandates for inclusionary housing, which use a portion of proceeds from rising real estate values to expand affordable rental and ownership opportunities for low- and moderate-income families. Housing supply is a crucial area for investment at the state and municipal levels and can contribute to financial stability for residents, tax bases for cities and states, and the vibrancy of communities. Prioritizing an increased supply of affordable rental housing near transit and good jobs is one of the most impactful ways state and local officials can shape the long-term financial health of their residents and jurisdictions.
Ensure eligible households actually receive housing subsidies in a timely manner
It will take some time before additional rental housing supply has a measurable impact on the most financially vulnerable renters. These renters will need extra support as the rental crisis continues to take its toll. Policymakers at the federal, state, and local levels can take additional steps that provide financial assistance to struggling renters. Data from the U.S. Census Bureau indicate that less than one-third of renters who were behind on their rent in spring 2022 either received rental assistance or expected it.21 In other words, most struggling renters were either denied or did not even apply for rental assistance. These renters are just the tip of the iceberg, as they are already behind on their rent. Many others manage to pay their rent while making cuts in spending or falling behind on other payments.
In the meantime, millions of renters will need financial assistance even if there is a boost in affordable housing supply sufficient to meet demand. Additional steps to provide such help should include:
- Protect and expand the Housing Choice Voucher program, making it available to additional low- and moderate-income brackets, which could lift 9.3 million individuals above the poverty line and cut the child poverty rate by one-third.22
- Increase funds for the Emergency Rental Assistance program to reach all families in need in a timely manner.23
- Increase contact with communities vulnerable to imminent housing crises so that they are aware of the Emergency Rental Assistance program through transparent and guided outreach efforts.24
Protect tenants facing evictions to increase overall housing security for renters
Some tenants will still fall behind on their rent as they encounter rising rents, other costly expenses such as health care and child care, and widespread economic emergencies and insecurities. These renters will need protections to keep them in their homes while they get back on their feet. Congress and the administration could use a range of tenant protections to supplement the value of additional affordable housing supply, including:
- Expand tenant protections to keep people housed, not just during the pandemic but also any time they face economic challenges.25
- Protect households that face eviction by guaranteeing renters’ right to counsel to better counter eviction proceedings and prevent homelessness.26
- Remove barriers to obtaining future housing by eliminating evictions from credit reports and public records, therefore empowering individuals who have experienced the trauma of eviction. The stigma of eviction records is detrimental for struggling households and severely limits future housing options.27 If eviction records were sealed, landlords would not be able to deny applicants on the basis of their past eviction.28
Additionally, at the state and local levels, mechanisms must be put in place to reduce preventable evictions. One way to achieve this is through expanding landlord-tenant community courts and increasing engagement of social service providers who could help avoid the high costs of eviction.29
There is no one silver bullet to address the affordable housing crisis. Affordable rental homes continue to be in short supply, and renters face high and ever-rising costs. However, policymakers have the tools and resources to ensure both greater supply of affordable rental units and better protections, financial and otherwise, for renters. Policy changes can strengthen many existing programs with the infusion of much-needed capital.
It is critical that policymakers at all levels of government address housing affordability. Some demand for homeownership will ease amid higher interest rates, which could ultimately lower housing prices and then spill over into lower rents. However, such shorter-term changes do not address the overall challenge of too little supply for the demand from lower-income households that has created financial insecurity for millions of Americans for so long. This is a moment when the Biden administration and others in government are advocating for increased housing supply; local and state officials can support and supplement this work through advocacy for greater supply, responsiveness to federal calls for innovation and partnership, and the prioritization of support for those squeezed by unaffordable rental housing while the market effects of increased supply take hold.
Policy inaction to address the affordable housing crisis adequately will only leave millions of American households vulnerable and unable to afford rent and other necessary expenses. Prolonging the pain in the rental market is not a viable approach.