Problem: 48% of renters in America spend more than 30% of their income on housing.
Solution: Build or invest in affordable housing.
What is affordable housing?
The federal government defines affordable housing as housing that a “household can obtain for 30% or less of its income.” By this definition, in America, nearly half of all renters cannot afford their housing. In Birmingham, for example, a worker paid minimum wage would have to work at least 61 hours a week to “afford” the rent of a one-bedroom apartment. Affordable housing can be accessed through government programs such as Section 8, where lower-income families only have to pay a portion of the market price for rent. The government pays the other part. By using a certain percentage of their rental properties for affordable housing, property owners can receive a federal tax credit, called the Low-Income Housing Tax Credit (LIHTC), and guaranteed partial-rent payments from the government. There are three ways to qualify for the LIHTC:
- At least 20% of the project’s units are occupied by tenants with an income of 50% or less than the area median income (AMI) adjusted for family size,
- At least 40% of the units are occupied by tenants with an income of 60% or less of the AMI, or
- At least 40% of the units are occupied by tenants with income averaging no more than 60% of the AMI, and no units are occupied by tenants with income greater than 80% of the AMI.
Some states and localities have their own programs and other tax credit policies for affordable housing as well.
How is investing in affordable housing solving the problem?
If a renter spends more than 30% of their income on housing, they typically will spend less than what is needed on healthcare, food, and transportation. By having access to affordable housing, families living in poverty can focus their limited finances on other needs. This could lead to increased welfare over the long run. Affordable housing greatly benefits six demographics: seniors, people with disabilities, students, military personnel, people in rehabilitation programs, and people recently released from correctional facilities.
What are some issues with affordable housing?
One of the biggest problems currently facing affordable housing is the mismanagement of federal, state, and local funds reserved for affordable housing programs. In Washington D.C., for example, the city-sponsored affordable housing program only requires a pay stub to demonstrate that their income qualifies. However, even if a person has two jobs, they only have to submit one pay stub. This makes it appear that a person only makes half of the income they actually do. With there being a lack of affordable housing available in the D.C. area, someone who may desperately need housing may lose out to someone who only presented half of their actual income. Similar issues have happened across the United States. In Chicago, the trust responsible for preserving affordability of housing has an 18-member board and the use of two full-time staff members belonging to the Department of Planning and Development, but no one doing full-time oversight of the program.