More Funding for Affordable Housing
In spite – or perhaps because of – the housing crisis, more money is being made available for affordable housing. Initially, most of the impetus came from the Federal government’s stimulus plan, but now state and local governments are introducing plans of their own.
Prior to the collapse of the bubble, housing prices had risen so fast (especially compared to stagnating income) that it had become difficult for many moderate and low-income people to maintain their standard of living. According the US Department of Housing and Urban Development (HUD), “The economic expansion of the 1990s obscured certain trends and statistics that point to an increased, not decreased, need for affordable housing…and a family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States.”
One would think that the bursting of the real estate bubble would have alleviated this problem. In actuality, it made the problem worse. This is mainly because the drop in housing prices has been accompanied by a greater decline in incomes, wrought by the economic recession. “Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more then 50 percent of their annual incomes for housing.”
In addition, mortgage default and subsequent foreclosure on rental properties is disproportionately affecting the poor. According to Harvard University’s The State of the Nation’s Housing 2009: “Tenant evictions from small rental properties in the foreclosure process are now a major concern, and all the more so because some landlords reportedly continued to collect rent even as they fell behind on their mortgages and left tenants unaware of the pending foreclosure.” Finally, the financing for new affordable housing units “was threatened when the recession killed the market for low-income housing tax credits, which are the nation’s main funding method for low-income housing development.”
Thankfully, this is starting to change. “U.S. Housing and Urban Development Secretary Shaun Donovan last week released $2.25 billion in stimulus money to jump start as many as 1,000 stalled affordable housing projects across the nation.” The money will come in the form of grants, and must be spent by 2012. HUD is also working outside of the stimulus plan to increase the stock of affordable housing: Its Self-help Homeownership Opportunity Program (SHOP), “provides funds for non-profit organizations to purchase home sites and develop or improve the infrastructure needed to set the stage for sweat equity and volunteer-based homeownership programs for low-income families.” In addition, “The Homeownership Zone program allows communities to reclaim vacant and blighted properties, increase homeownership, and promote economic revitalization by creating entire neighborhoods of new, single-family homes.”
Of course, obstacles remain. The demand for affordable housing will most likely outstrip supply for the foreseeable future. Still, the measures described above are expected to result in an immediate boost to supply, with the potential to help those most in need weather the downturn and get back on their feet.