It seems counterintuitive. America's in a housing slump, with real estate prices in some areas so low that homeowners owe more on their mortgages than their dwellings are now worth. And yet, the nation's biggest housing problem is affordability.
The number of households spending more than half their income on housing has risen sharply – up 1.2 million to 17 million from 2004 to 2005. Owners and renters, middle-income and poor, 1 in 7 households carry this burden – most of them low-income Americans, according to a June report by the Joint Center for Housing Studies at Harvard University's Kennedy School of Government.
The data cover a time before the slump really slouched, but the affordability problem will continue, the center's researchers believe. As the ownership market softens, the rental market tightens, and that especially hurts poor families and seniors. Incomes have stagnated or declined, and job growth is more in lower and higher paying jobs – less in the middle ones. State and federal resources pale next to the problem.
The trade-off for many Americans is a longer commute (at higher gas prices), substandard housing, or crowded living quarters. It can also mean no savings and less spent on healthcare, food, or clothing.
As so often happens, a leaking roof has to be near collapse before Congress opens its toolbox. But the House Financial Services Committee will hold a hearing next week on a bill that's a significant new federal effort at affordable housing. The legislation, introduced by Democrat Barney Frank of Massachusetts, aims to build, preserve, or rehab 1.5 million housing units over the next 10 years.
That's a little less than half of what's needed, according to housing advocates, but the bill wisely builds on lessons learned over decades – for instance, favoring mixed-income developments over isolated poor areas, and placing housing near jobs and transport to buttress earning power.
The financing is more questionable, drawing GOP objections – though some Republicans support the bill. It creates a housing trust fund that relies on monies from mortgage financing and insurance companies set up by Congress to help those with low incomes. It doesn't raise taxes, but will it rob poor Peter to pay poor Paul?
Still, the program targets low-income Americans and gives control to states and localities. Housing markets and needs differ locally. The federal government is not the best judge of where to build, even if it provides the lion's share of money.
One might question the bill's emphasis on bricks and mortar. Research shows it's more cost effective to subsidize housing (through vouchers, for instance), than to build it. But that holds true for weak housing markets. On the coasts, where metro markets are still tight, cities are losing public housing units as landlords opt to sell.
For nearly a decade, housing has gotten less and less of the federal budget. The federal government has been able to help only a quarter of those who qualify for federal assistance, so it's encouraging to see Washington's renewed interest.
Yet states and localities can also improve their record. They can coordinate regionally. And a big help would be to change restrictive zoning laws that greatly limit subsidized housing locations. That doesn't cost a penny – just political will.