|JCHS Releases 2016 State of the Nation’s Housing Report|
|On June 22, Harvard University’s Joint Center for Housing Studies (JCHS) released The State of the Nation’s Housing 2016, its latest annual report on U.S. housing trends. While the report finds that the housing market continues to recover post-crisis, it highlights serious challenges, including all-time high renter cost-burdens, growing concentrations of poverty, falling homeownership rates, and tight mortgage credit. JCHS cites state efforts, including those by state Housing Finance Agencies (HFAs), to address these challenges but concludes that increased federal investment in affordable housing is also necessary.
According to the report, the overall housing market recovery has been largely driven by increased demand in the rental market. Over 36 percent of U.S. households chose to rent in 2015—the highest portion since the 1960s. Rental demand is expected to remain strong as millennials form new households and homeownership rates drop.
JCHS finds that rental prices rose by more than 3.6 percent in 2015, outpacing wage increases and often making rents unaffordable. Nearly 21.3 million renter households were cost-burdened (paying 30 percent or more of their income in rent) in 2014, 3.6 million more households than in 2008. Alarmingly, the report also finds that the number of severely cost-burdened households (paying 50 percent or more of their income in rent) is now at a record-high 11.4 million.
In the report, JCHS points out that cost-burdened households, especially those with low incomes, often must make difficult choices to pay their rent, spending less on basic necessities like food and transportation, living in inadequate or overcrowded apartments, and facing financial instability. Severely cost-burdened households, for example, spend 41 percent less on food and substantially less on healthcare than other households. The report states that cost burdens can lead to evictions and homelessness for the most vulnerable, feeding into a damaging cycle for households that impacts employment prospects, financial stability, and school performance.
The report says that the Low Income Housing Tax Credit (Housing Credit) is the nation’s primary tool for financing new affordable housing and concludes that demand for Housing Credit-financed housing has long vastly exceeded its supply. As NCSHA reported in May, Senator Maria Cantwell (D-WA) and Senate Finance Committee Chairman Orrin Hatch (R-UT) introduced legislation to tackle this mismatch and address the rental affordability crisis by increasing Housing Credit authority by 50 percent over five years beginning in 2017.
The report also focuses on the HOME Investment Partnerships program (HOME) for its critical role in affordable housing gap financing, and criticizes severe funding cuts to this flexible program. NCSHA and other HOME advocates note that Congress’ decision this past year to provide a slight increase in program funding is a step in the right direction but is little compared to the 50 percent decline over the last five years.
The JCHS report also finds that the single-family housing market continues to struggle in the wake of the economic crisis. According to the report, the U.S. homeownership rate fell to 63.7 percent in 2015, the lowest level in nearly a half-century. The report also finds that foreclosures have almost declined to pre-crisis levels, but a lack of available and affordable credit for would-be home buyers continues to hamper the market’s recovery.
For the homeownership market to fully recover, the report argues, it must evolve to meet the needs of emerging new borrower populations, including minorities and millennials. The report also says that one of the biggest impediments these consumers face is the inability to save up for a large down payment, a problem made worse by the increasing number of young borrowers with substantial student loan debts. The report credits HFAs with being a "vital source of down payment assistance and related first-time homebuyer programs" and approvingly cites Fannie Mae’s and Freddie Mac’s efforts to partner with HFAs to support low-down payment lending.
The report also credits HFAs for their various programs to finance energy efficiency upgrades for affordable single-family and multifamily housing. Such "Green" initiatives not only benefit the environment, but also complement HFAs’ affordable housing efforts by helping low- to moderate-income families save on utility costs.
The report, supporting materials, and video from the report’s release event are available on JCHS’ website.