A Primer on Our Housing Crisis

Economic Policy Brief #59 | By: Devyne Byrd| February 06, 2024

Feature Photo taken from: www.inthesetimes.com

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Although the United States is a global economic force, its economic prosperity has not extended to those citizens who are suffering from a dire housing crisis.  The housing crisis has been exacerbated by insufficient housing supply, soaring prices and interest rates, stringent financing, and the continuing impact of COVID-19. As wages have not risen to align with these issues, many Americans have been priced out of both the homebuying and rental process, leading to mass evictions, foreclosures, and homelessness.

Extremely low-income families are at the greatest risk with more than 7 million affordable homes missing from the market according to the National Low Income Housing Coalition. Their Out of Reach report for 2023 emphasizes the gap between the cost of two-bedroom rentals and the wages of Americans in the same area, with sixty percent of all workers earning an hourly wage that is insufficient. Urban and metropolitan areas face the largest rents, with gentrification increasing the prices and competition for homes. This leads to low earners devoting a significant portion of their income to rent, above the 30 percent guideline that HUD suggests. With rent prices continuing to rise, this cost burden becomes more unattainable for the average renter.

Analysis

Ramping up affordable housing options is the first step to alleviating the growing housing crisis. The primary ways to increase affordable housing options are through rent control, increased public housing construction, and government subsidies. These steps would allow low-income families access to housing within their means and prevent homelessness and financial instability. Additionally, enacting policies that prevent short-term rentals would put millions of units back on the market. These units would then be available to tenants in the communities and lower prices in the market.

A cohesive effort of  federal, state, and local governments is needed to ensure the viability of policies enacted to alleviate the crisis. This would encompass federal funding that the state uses to implement affordable housing projects and tenant protections and provide legal support against constitutional challenges. By increasing funding for a larger housing supply, local governments could avoid more litigious forms of action such as ordinances on property restrictions. For example, in 2016 Austin, Texas passed an ordinance to ban short-term rentals that weren’t owner-occupied, citing limiting housing availability for locals and displacement of families as the justification. In a city known for high housing costs and rapid gentrification, this was a move lauded by many as proactively seeking to protect its population. However, the ordinance was struck down by a federal judge in August of 2023 who found it in violation of the dormant commerce clause. The dormant commerce clause is the legal doctrine that states cannot pass laws or regulations that burden interstate commerce. In this case, the city would be limiting out-of-state owners’s ability to make money off of their property even if they did not reside in the city.  To circumvent future setbacks such as these, federal and state funding is necessary to give local authorities the means to alleviate the housing crisis and directly provide for low-income residents instead of using restrictions that run the risk of being challenged for constitutionality.

California has had success with implementing legislation that increases housing developments and protects low-income tenants.  In 2019 the California Senate passed the Housing Act of 2019 which temporarily suspended local restrictions so that housing development could be increased. They also passed ordinances easing zoning and density measures so that affordable housing could be built in more places and high-density housing projects could quickly be started. Although housing remains a significant issue throughout the state, the successful litigation has assisted with ramping up housing supply and alleviating the pressure on low-income citizens.

As Americans continue to struggle to find safe and stable housing, government intervention is necessary to protect low-income residents’ viability. With the inflationary market and economic hardships, the country is facing, the government has a duty to enact policies that support its most vulnerable populations and ensure housing.

Engagement Resources

• Out of Reach Report – Research by the National Low Income Housing Coalition that shows the gap between wages and housing affordability on a state-by-state level.
• Center on Budget and Policy Priorities – An article on proposed solutions to the affordable housing crisis, including rental assistance and the housing supply.

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