Soaring rents drain household budgets for millions of working people

By Christopher Burrell | GateHouse Media Illinois | May 30, 2015

Renting has long been a temporary step toward home ownership or a permanent part of living on a tight budget.When people would sit down to work out a budget, devoting 25 percent or 30 percent of monthly income to rent was the “affordable” part of still paying the other bills and maybe saving a bit.But that calculation no longer works for millions of people. Over the past decade, the number of households who now must devote more than half of their monthly income to rent has jumped nearly 50 percent — more than 11 million households in 2013.One in four American renters now struggle under what experts describe as a “severe rent burden.” For the working poor — earning $15,000 to $30,000 a year — the number is one in three households. The high cost of rent forces people to cut back on food, medicine and child care, and puts many on the brink of eviction and homelessness.Pressure on renters comes from two sides: rising rents in the wake of the housing collapse coupled with stagnant wages or underemployment. As home ownership fell to its lowest rate in 20 years, increasing numbers of Americans now rent apartments and homes, squeezing vacancy rates and pushing up rents.For decades, the safety net for low-income people straining to maintain adequate housing came from federal public housing programs that provided low-cost apartments or rent vouchers. Those programs now help 5.5 million households live in affordable housing, but that’s well below the number of people in need.Residents at or below 80 percent of the area median income are designated as low income and can often qualify for some form of housing subsidy.In Peoria, 45 percent of the population qualifies for assistance.When the Peoria Housing Authority announced last August it would accept applications for Section 8 vouchers, a window only open for a single day for the first time in several years, the waiting list was composed of 250 families or individuals. Thousands queued outside the PHA’s headquarters amid heavy rainfall hoping for one of the vouchers, which allow residents to apply government subsidy to rent at a property of their choosing if the landlord agrees.Today the list contains about 1,800 people hoping for a Section 8 voucher. An additional 400 are on a wait list for traditional public housing, about a third of which will be denied housing because of their criminal history.“That, alone, demonstrates the need in this community to have more affordable housing options for our low-income residents,” said Timm Krueger, PHA’s community relations manager.As market forces increased the numbers in need, some federal housing programs were cut and others are in jeopardy. Budget cuts in Congress removed 100,000 rent vouchers in the last two years, and the federal government hasn’t added any new public housing units in more than a decade. Experts in affordable housing say families buried under high rents need an expansion of federal rent voucher programs. They also need state and local governments to invest in more affordable housing construction.The affordability crisis facing renters shows few signs of improvement, even as millions more renters are expected to enter the market in the coming decade.

Recession driven

Today’s crisis of high rents began in the recession and housing market collapse of 2008.The recession left 8.4 million Americans jobless, with unemployment at 10 percent. Wages fell or remained flat. Millions were underemployed or forced into part-time work.The U.S. housing market also plummeted, losing $7 trillion of home equity. Millions of homeowners owed far more than their homes were worth, and foreclosures soared. More than 3 million homeowners had nowhere to go but the rental market.Peoria’s East Bluff was one of the neighborhoods hit hardest by the foreclosure crisis, where vacancy rates skyrocketed. A collaboration of businesses and not-for-profit organizations is using a $3 million grant from the Attorney General’s Office to rehabilitate and construct 30 affordable housing units, including single-family homes that will be sold to income-eligible families.Former middle class and low income homeowners who lost homes during the recession flooded the rental market, having lost not only the equity in their homes but often a job, explained Celia Smoot, director of LISC housing with Local Initiatives Support Corp.’s national office.“That crisis around a single-family housing product led to not only a high amount of blight and displacement, but to a discussion that we really need much more affordable housing,” Smoot said in a phone interview from her Richmond, Va., office.The portion of renters increased from 31 percent in 2004 to 36 percent in 2013. Vacancies are scarce, which keeps rents high.Census data show renters were 43 percent of Peoria’s residents in 2013, with a median rent of $710 per month. Throughout central Illinois, owner occupation rates are much higher and rents slightly lower, with 28 percent of residents renting with a median rent of $689 in census data for Peoria, Tazewell, Woodford, Marshall and Stark counties.Median rent in the Northeast, already a high-priced housing market, shot up 62 percent between 2002 and 2014 to $1,043 a month. Across the country, rising rents are the norm. Median rent nationally in the same time period increased 34 percent from $568 to $766 a month.As rents rose and incomes fell, the portion of households with “severe rent burdens” (more than half of income) hit 27 percent in 2013, the highest rate in 50 years.Among working poor households, 34 percent pay more than half of their income toward rent.Nearly 45 percent of renters in the five-county Peoria metro area are classified as rent burdened, meaning they spend more than 30 percent of income on rent. Many Americans, especially those aged 25-44, have seen a similar drop in wages. Median weekly pay for workers aged 25 to 34 stood at an inflation-adjusted $777 in 2002. By last year, a week’s pay had withered to $726. For 35- to 44-year-olds, median weekly income was stuck at about $880. The drop in wages has fallen hard on families. The majority of working poor renters is also young: Two-thirds are younger than 44, and just less than half have children. Between 2002 and 2012, the ranks of working poor saddled with severe rent burdens grew by 34 percent from 2.2 million households to more than 3.2 million.

Uneven history

Access to decent housing grabbed national attention more than six decades ago. The return of World War II veterans and the onset of the baby boom quickly led to a housing shortage. In response, the federal Housing Act of 1949 created the Federal Housing Administration, mortgage insurance, and funded the construction of 800,000 public housing apartments. The thrust of the law was to increase the amount of lower priced housing for average Americans. Over the next 20 years, however, the large public housing complexes became centers of grinding poverty and crime. By 1968, the federal government recognized the downside of concentrating poverty and prohibited the construction of high-rise buildings for families. Peoria’s three largest and oldest developments — Warner Homes, Harrison Homes and Taft Homes — have been partially or totally demolished amid concerns about drug and violent activity. In 1997, half of all crimes committed on PHA properties were at Warner Homes. Two years later, the 400 units were demolished and replaced by RiverWest and RiverWest South, less dense developments that include some residents using Section 8 vouchers. The newer developments today have significantly lower crime rates than their predecessor and the surrounding neighborhood. Harrison Homes, once more than 1,000 barracks-style units in South Peoria, has been mostly redeveloped. “These redevelopments brought new life to these areas, along with needed changes,” Krueger said. At Taft Homes, just north of Downtown, 15 buildings that had become a haven for illicit activity were torn down in 1996, during the same time that a number of units were renovated. The PHA’s current redevelopment effort aimed at replacing 216 units at Taft Homes with smaller developments throughout the city is driven by federal regulations to construct public housing in areas of opportunity, away from the concentrated poverty of their original locations. Additionally, leveraging the potential value of Taft’s current location near Downtown and the riverfront could be an important factor in the PHA’s financial longevity. “It really boils down to HUD’s commitment to Affirmatively Furthering Fair Housing. You can’t concentrate public housing in areas with high levels of poverty,” Krueger said. In the 1970s, the government created the federal rent voucher system that provides poor households with a rent subsidy to take into the private market. Sheila Crowley, CEO of the National Low Income Housing Coalition in Washington, D.C., said that in those years there was a surplus of affordable rental housing. As public housing complexes deteriorated and came under fire politically, federal programs in the 1990s pushed demolition of thousands of apartments. More funds and attention shifted to rent vouchers, which can be used in rural areas, small towns, or big cities, and are now the most common form of federal housing assistance. Vouchers help 2.1 million households rent apartments on the private market. In the Tri-County Area, the number of residents using Section 8 vouchers — about 2,000 according to data compiled by the Tri-County Regional Planning Commission in 2012 — dwindles in comparison to the units of subsidized housing. Peoria, Tazewell and Woodford counties together have about 6,400 units of subsidized housing, including public housing managed by local housing authorities such as Peoria’s and Pekin’s and many private developments that receive government support. Under the Housing Choice voucher system, also known as Section 8, tenants pay 30 percent of their income toward rent. The voucher covers the rest up to a limit set by the local housing authority. If the rent exceeds the limit, voucher recipients can pay the difference but only up to 40 percent of their income. A Rental Assistance Demonstration is a new program administered by the Department of Housing and Urban Development, which oversees local housing authorities. The competitive RAD program converts public housing units into project-based vouchers. Eighty units at Taft have been accepted into the RAD program, which PHA officials say gives the housing authority more autonomy and less red tape during the redevelopment process. Unlike Section 8 vouchers, project-based vouchers can be applied only to specific units of designated housing.

Vouchers

Between 2007 and 2011, the number of U.S. households eligible for rental subsidies increased 21 percent, growing from 15.9 million to 19.3 million. Only 5.5 million households receive rental vouchers or public housing apartments. As of 2013, more than 10 million households need but cannot obtain federal housing assistance, according to HUD. Eligible people wait anywhere from several months to several years for rent vouchers or public housing assistance. Many urban housing authorities won’t even accept applications. Not enough funding for rental assistance is the chief reason for the waits. Even as the need grows, cuts to federal rental assistance that began in the Reagan era continue today, said Crowley. More recent budget cuts approved by Congress in 2013 and 2014 led to the loss of 100,000 rental vouchers, only a third of which were restored last fall. Rent controls on more than two million apartments, originally built with federal tax credits and subsidies, are set to expire, which can push them to market-rate rent levels. With another 4 million renters forecasted in the next decade, the plight of the working poor struggling to find affordable housing is expected to grow.

Financial drain

Evictions and homelessness threaten rent-burdened households. When half of each month’s income goes to rent, an unexpected car repair or an unpaid sick day can be devastating. Barry Bluestone is director of the Dukakis Center for Urban and Regional Policy at Northeastern University in Boston, which studies housing markets and labor. Bluestone said working-poor renters scrimp on everyday basics: food, clothing, medicine and child care. After paying the rent, he said, “it leaves almost nothing for anything else.” A 2013 report from the Joint Center of Housing at Harvard University found that households saddled with severe rent levels spend nearly 40 percent less on food each month than households with affordable rents, or roughly $130 less, tying rent burdens to the problem of hunger in America. The approach to creating affordable housing, some advocates say, must be more holistic. Organizations such as LISC, which has an office in Peoria, want to target housing as a means to address additional needs in the community. Housing services, Director of LISC Housing Celia Smoot said, are often coupled with other support services such as financial counseling provided by partners such as METEC in Peoria, which also offers job placement services. Evictions and homelessness are probably the worst fears for people struggling with high rents. Pinned down by high rents, low-income families usually can’t even afford the two months rent and security deposit to move somewhere else. Jane Mauldon, a professor at the University of California Berkeley who researches poverty and housing issues, said keeping people in their housing is the most important intervention. But across the country, evictions are on the rise: Nevada up 18 percent since 2012, New York up 6 percent and Ohio up 5 percent between 2010 and 2013. The number of homeless children is now at record levels. Last November, the National Center for Family Homelessness counted 2.5 million children whose families were living in a car or a shelter, or doubled up temporarily with relatives or friends.

Help needed

Housing advocates, public policy experts and federal housing officials say solving the affordable housing crisis requires help on three fronts: higher wages for the working poor; more affordable rental housing; more assistance for low-income renters. Boosting wages and pulling poor Americans out of poverty is a complex goal that has seen only modest progress. The U.S. poverty rate stood at 19 percent in 1964 and fell to 15 percent in 2012. By 2013, it had dropped to 14.5 percent, but the number of people still stuck in poverty was unchanged at 45.3 million. Fourteen states raised the minimum wage last year, and several cities in the West have set minimum wages higher than state or federal levels. Illinois, once the state with the third highest minimum wage nationwide, now hovers at $8.25 per hour, $1 above the federal minimum wage. A non-binding referendum on the November 2014 ballot showed voter support for upping that figure to $10 per hour. Barbara Sard, head of housing policy at the Center on Budget and Policy Priorities in Washington, D.C., said higher wages can reduce the amount of income spent on rent, she said, but she also warned that “when the economy heats up, rents also tend to rise.” Reducing severe rent burden also means constructing more affordable rental housing, said Bennett Hecht, author of two books on affordable housing and CEO of Living Cities, a not-for-profit agency working on urban poverty and housing issues. Part of the problem today is most new construction is for high-end apartments. The recent Harvard University report found median rents for newly built apartments were affordable only to households earning more than $42,000 a year. Hecht said local efforts alone cannot match the need. A 121-unit affordable housing project built last year in Arlington, Va., attracted close to 1,000 applicants. Government action is critical. Hecht pointed to New York City Mayor Bill di Blasio’s plan to build 80,000 affordable apartments and to preserve another 180,000 as affordable rental stock. HUD has asked Congress to fund an additional 300,000 housing choice vouchers for next year. Sheila Crowley at the National Low Income Housing Coalition doubts Congress will comply. “At the very best, what we are doing is defending against losses (of vouchers and public housing). We are not doing anything to increase investment,” she said. Another proposal floated for a number of years would overhaul the mortgage interest tax deduction. The idea is to reduce the available deduction and replace it with a 15-percent tax credit for homeowners. Supporters say the increased tax revenue could generate funds for federal rental assistance. Don Williamson, a tax and policy expert and the executive director of American University’s Kogod Tax Center, said the powerful Realtor and homebuilders lobby would likely stop the reform, which they see as reducing the appeal of home buying. The need and political will to do something on a national scale, housing advocates say, should be more apparent as the numbers of rent-burdened households, evictions, and childhood homelessness peak. “I do think that the spreading of housing unaffordability problems to more areas of the country increases the chances there will be more political salience to meeting this need,” Sard said. “It used to be you would think of places with major housing problems like New York, Boston and San Francisco, but that is increasingly not the case.”

Christopher Burrell is a reporter for the Patriot Ledger in Quincy, Mass. He took one month away from his newsroom to work on this national story and found that the picture throughout the United States was just as bleak.

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