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Why is decent, affordable housing important?

Decent, affordable housing is important to families. Certainly, it fulfills a basic human need for shelter, but it also contributes to the well-being of both parents and children. Studies show that children in stable housing do better in school and are less likely to experience disruption in their education due to unwanted moves. By alleviating crowding and improving housing quality, decent, affordable housing reduces exposure to stress, toxins and infectious disease which leads to improvements in both physical and mental health. Affordable housing also frees up funds within families' tight budgets to spend on health care and food. Studies have found that children whose parents receive housing assistance benefit from better nutrition. For parents, living in decent, affordable housing also means reduced stress due to a lessening of concerns that high housing costs will lead to foreclosure and eviction; this in turn leads to fewer physical and mental health problems and reduced absenteeism on the job.

To learn more about how housing helps kids do better in school and improve child and family health, click here to leave this site to access literature reviews on "how housing matters" prepared by the Center for Housing Policy and Enterprise Community Partners.  Click here to read a research brief produced by the Center for Housing Policy for the John D. and Catherine T. MacArthur Foundation that profiles the research efforts of Sandra J. Newman, director of the John Hopkins Institute for Policy Studies, to understand how affordable housing affects the lives of its occupants [PDF].

Affordable housing also is important to the economic vitality of communities. Affordable homes can attract and retain employees to your community – a selling point and a competitive advantage for area employers. Affordable homes also support the local workforce so they can live close to their jobs. Shorter commutes allow workers to spend more time with their families while the community benefits from reductions in traffic congestion, air pollution and expenditures on roads. In revitalizing communities, the construction of affordable homes can also help to stimulate economic growth. A healthy mix of housing options, from market-rate and affordable rental housing, single-family homes, duplexes, as well as developments for seniors ensures opportunities for all individuals to improve their economic situation and contribute to their communities.
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Why is there still an affordability problem?

According to 2011 data from Harvard's Joint Center for Housing Studies, between 2001 and 2007 the number of households paying more than half of their income for housing, considered a severe housing burden, increased by 30 percent to 17.9 million households. Importantly, both the absolute number of severely-burdened households and the percentage of the market they represent increased every year during this period.

While some assume that recent home price deflation means that we no longer have a housing affordability problem, the data does not support this assumption. In the unlikely event that home prices should continue to decline until 2015 and eventually reach 2000 levels, projections from the Joint Center indicate that there would still be 16.2 million households severely burdened by housing costs. And these statistics do not even capture the fact that many working families can only afford to live far from their places of work, forcing them to endure long commutes and spend much of their housing cost savings on transportation.

So why do housing affordability problems persist in many communities? There are a variety of reasons, including that housing affordability is determined by the relationship between a variety of factors including income, rent or mortgage payments, and energy costs. 

Working families have seen only modest wage increases in recent years.  In fact, after accounting for inflation, many families' incomes either remained flat or dropped while home values in many cities increased to unprecedented levels, even doubling in some metropolitan areas. Although prices have recently begun to decline, they haven't declined enough to be affordable to many working families.

With stagnant wages, the only housing option for many working families has been rental housing. And the Center for Housing Policy has demonstrated through their Paycheck to Paycheck research that in most markets, even rental housing is out of reach for families that depend upon workers in low-paying jobs. These families require ongoing subsidies such as those provided by the federal government through its various rental assistance programs. Unfortunately, available subsidies serve only about one-quarter of those in need -- a strong argument for continued and expanded federal funding for these programs.

Photo courtesy of Potterhill Homes

While home prices have declined in many markets, rents have not seen comparable declines. One reason for this is the limited production of rental housing. In the first five years of this decade, barely 200,000 units of rental housing were produced -- not enough to replace units lost to conversion or demolition much less meet rising demand, especially in some of the country's strongest markets.  And the economic downturn has worsened the outlook for rental housing production as sources of capital have become more difficult to secure, which is especially true for funding from Low Income Housing Tax Credits, one of the most important funding sources for developers of affordable rental properties.  At the same time, in many communities families affected by the foreclosure crisis may be seeking out rental housing, placing additional pressure on this segment of the market and causing rent levels to increase.

For working families who own a home, dropping home values have meant that many now owe more than their homes are worth, making it difficult to refinance their mortgages to lower their monthly housing expenses. Although some government efforts are attempting to address this problem, for existing homeowners the loss in home value can mean lost wealth and an increased risk of foreclosure, rather than any increased affordability. Some of these homeowners will lose their homes; in fact, initial findings are showing that even those who refinance may eventually lose their homes.

Energy costs, including utility payments and transportation costs, represent the final component of housing affordability. These costs have become increasingly volatile with the growing instability of our energy supplies and will likely remain unpredictable for the foreseeable future.  Transportation costs have also increased with gas price volatility, a fact that is too often overlooked when determining housing affordability. The combined cost burden of housing, utility and transportation costs has only recently been documented through research conducted by the Center.

The new realities of our housing market will require new and creative policy solutions at the federal, state and local levels. State and local policies that make it difficult or expensive to build new affordable homes and apartments or rehabilitate existing units often serve to exacerbate affordability by preventing the market from supplying enough high-quality housing to meet the demand and pushing development further from job centers. Low-density zoning, excessive and duplicative permitting procedures, and policies that limit the availability of multifamily rental homes are examples of policies that may drive up the price of housing by restricting the supply of affordable homes.

What can be done? provides the tools to help you tackle the problem in your community. Start with the Building a Strategy section to see where your community stands. Then, explore the many proven solutions to creating more affordable housing in the Toolbox section.

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Which is more important -- rental homes or homeownership?

To meet the diverse needs of your community, both rental housing and homeownership are important. The recent housing crisis demonstrated the risks involved with an overemphasis on one type over the other and the importance of having a balance of housing options. Rental homes fulfill the needs of many families. For some, especially low- and moderate-income families in high-cost markets or families who have recently lost a home to foreclosure, rental homes are the most financially realistic option. Other people rent because they prefer the lifestyle of renting and may be as socially invested in their community as homeowners typically are. Among their ranks are both former homeowners who are empty-nesters and lifelong renters who don’t want to worry about lawns, gutters and home repairs. Rental housing also provides a perfect housing option for people in all stages of the life cycle, including singles, the recently divorced, and the widowed. Still others rent because they expect to move frequently -- with some studies showing that increased housing mobility allows renters to take advantage of career advancement opportunities not available to less mobile homeowners. Finally, for some families, affordable rental housing is an important steppingstone that allows them to accumulate savings and become prepared for homeownership.

Homeownership is also a critical part of the housing stock and can be a stable and affordable option when the mortgage terms and home price are within reach of a family's budget. For many working families, homeownership represents the American Dream. Aside from comprising their largest financial asset, homeownership provides security from unwanted moves, control over features of their home, and tax benefits. Some studies have shown that homeownership is beneficial for children – they are more likely to do well in school, less likely to have behavior problems and less likely to become pregnant as teenagers. From a community’s perspective, homeowners may provide stability to their neighborhoods in which they are invested.

For these reasons, communities should work to ensure there is sufficient rental and homeowner housing stock to meet the diverse needs of all families in the community.

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