What to know about affordable housing

Make Me Smart June 27, 2022 transcript

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Kimberly Adams: Hello, I’m Kimberly Adams, welcome to Make Me Smart, where none of us is as smart as all of us.

Kai Ryssdal: I’m Kai Ryssdal. It’s Tuesday. Today, it’s deep dive time. Today’s topic, our single topic of the day is affordable housing, of which there is not enough in this economy. But it’s a really, really hard nut to crack. So that’s why we’re gonna talk about it.

Kimberly Adams: Indeed, and we also kind of were wondering what even is considered affordable housing these days, because a lot of people toss out that phrase, and depending on who you’re talking to, it might mean different things. So here to make us smart about this is Whitney Airgood-Obrycki, who is a senior research associate at Harvard’s Joint Center for Housing Studies, which just released a new report on the state of the nation’s housing. Whitney, welcome to the show.

Whitney Airgood-Obrycki: Thanks so much for having me.

Kimberly Adams: So let’s get the definition down first. What do people generally mean when they talk about affordable housing? Is there like a standard definition?

Whitney Airgood-Obrycki: There’s not. There’s generally two buckets of kind of what we’re talking about. The first is we sort of called Big A affordable housing. And those are units that are publicly subsidized and typically intended for low-income households. And you think, you know, the federal government is a large provider of this type of housing. So you might have in your mind something like public housing, there are the low income housing tax credits, housing vouchers, and then other project-based subsidies that fall under this sort of big A affordable housing umbrella. And then there’s everything else. There’s other affordable housing, and it can have different definitions. As a general concept, it’s just housing that’s priced within a household means. And then when we think of housing that’s affordable at the lower end of the market, we sometimes refer to that as naturally occurring, affordable housing.

Kai Ryssdal: So, back to the capital A thing. Who builds those capital A affordable housing units? Are those government build? Private? I mean, I don’t get it.

Whitney Airgood-Obrycki: It’s a combination of public private partnerships. And when we think about the public housing program, the administration of housing choice vouchers, and then there are programs like project-based 8, that’s run through public housing authorities, and also through nonprofit housing agencies. The Low-Income Housing Tax Credit Program uses a variety of developers and partners, so that’s a true public private partnership program that’s going for the development and preservation of affordable housing.

Kimberly Adams: You hear all the time, at least tossed around quite a bit, this idea that you shouldn’t be spending more than a third of your income on housing. Is that, is that still a good metric? And do you have any sense of, you know, how many of us are actually in that window?

Whitney Airgood-Obrycki: It’s a little bit arbitrary. But it’s a metric that’s used a lot in our research, and it’s used a lot in housing policy. It’s actually 30%, rather than a full third. And if you spend more than 30%, you’re considered to be housing cost burdened. And as I said, this is used in a bunch of our housing policy programs. It is arbitrary, but it’s very easy to calculate, which is why it has such wide adoption. All you need to know is how much a household is paying for rent and utilities, and how much their income is. So compared to some other metrics that we have for considering housing affordability, it’s kind of the easiest to translate across different places and across different households. So we do have a significant housing cost burdened problem for renters. About half of renters are paying more than 30% of their incomes on housing. And we actually saw increases in the first year of the pandemic as well. And our cost burden rates are up pretty significantly over the last few decades. So from 2001 to 2011, when we think about the last recession, there was a 10 percentage point increase in cost burdens, they came down a little bit through 2019, and then the pandemic has boosted them up again.

Kai Ryssdal: What sources of assistance then are available, at whichever level, for the people who are cost burdened?

Whitney Airgood-Obrycki: Yeah, so in part it’s these federal subsidies are the big one, but they’re not entitlements, so just one in four income eligible renters actually receives rental assistance. That leaves a lot of people without any support really. And that’s the big problem here, that when we have all these cost burdened renters, nearly 20 million cost burdened renter households, there just isn’t enough support to go around. So then we’re left to other channels to try to develop and preserve affordable housing. And they frankly just fall short. So that’s part of why we’re in the current crisis, that we have, you know, incomes just aren’t high enough to keep up with the rent increases, and there just isn’t enough support.

Kimberly Adams: Is there a reason why, when we’re talking about being cost burdened, it seems this conversation focuses much more on renters than people who maybe own their homes but have an unaffordable mortgage.

Whitney Airgood-Obrycki: Yeah, renters have higher cost burdened rates in general. So there. It’s about one in five owners is cost burdened, as compared to about one in two renters. And part of that is that renters have lower incomes. They’re also, you know, if your rent gets hiked, it’s a little less stable than perhaps a mortgage payment. And so there can be unexpected increases in rents, and it’s just harder for renters to weather that. Renters also just have, you know, lower wealth, fewer financial resources. So it’s just much harder to weather these increases in rents and to weather different emergencies that these households face.

Kai Ryssdal: So this is gonna sound a little stupid, but how did we get here? And remember, the podcast is only half an hour long.

Whitney Airgood-Obrycki: It’s not stupid at all. And I can address some of this. A big part of the problem that we’re talking about right now is that we just haven’t been building enough. And that’s true on both the homeowner and the rental side. And part of the issue is that after the last recession, we had more higher income renters who were stuck in the rental market, or who chose to stay in the rental market longer. And that’s put a lot of pressure on things. And so that’s why we’ve really seen this problem exacerbated over the last decade especially. So we have a lot of higher income renters, a lot of rental demand, people who are shut out of homeownership right now, and then not enough supply to compensate for that demand. So then we just see rents continue to rise.

Kimberly Adams: And on the supply side, you know, builders will often say that they can’t afford to build affordable housing, because it doesn’t pencil out, that it’s too expensive to build these things without then renting them out at a higher price. I’m living here in DC, which has a terrible affordable housing problem, as many cities do. But they keep building more luxury apartments.

Whitney Airgood-Obrycki: Yeah, I think there’s a thought that, you know, developers are trying to seek maximum profit and are going for those higher income renters, which is definitely true. There’s also a component of it, though, that we’re seeing all the inputs to construction rising. So you look at the price of lumber, you look at the price of land, and a lot of the desirable places where people want to live are places like urban areas in DC, Boston, San Francisco, where it is more expensive to build and more expensive to acquire land. We’ve also had an issue in the construction industry over the last few years, where there just hasn’t been enough workers. So then the cost of labor is also increasing. So they have all these inputs increasing. In some places, there’s a lot of regulation that adds requirements to what housing has to include, that can increase some of the costs as well. So if you’re required to provide four parking spaces for every multifamily unit, or, you know, whatever the requirement is, then that’s going to add costs to construction as well. So all of this is compounded, and it makes it hard to build out lower price points without subsidies.

Kai Ryssdal: Right. So look, what are the policy and answers here? I mean, if you could call the relevant people on Capitol Hill or in the White House and say, listen, you need to do these three things, what would they be?

Whitney Airgood-Obrycki: I think we have a lot of the policy tools that we know work, and we just need to be using them on an expanded scale if we want to be able to make a dent in the affordability crisis. The big thing, especially at the lower end of the spectrum that I know I’ve mentioned a couple of times, are just we need subsidies, and they’re just vastly underfunded. So federal programs can work when they’re done well, but historically, we just haven’t put the resources and support into those for them to be effective. So those are just going to be crucial to reach the people at the lowest end of the income spectrum who just don’t have enough income to be able to afford the private market, and now we just can’t build at those price points without some kind of subsidy. We’ve seen a lot of momentum for some other tools, though. And some of it is just expanding it. So among those would be zoning changes that reduce barriers to new supply and allow for potentially less expensive types of housing. We’ve seen adoption of this in places like California, Oregon, here in Massachusetts, we just had a MBTA (Massachusetts Bay Transportation Authority) that our transit communities have had major zoning changes. And that can include things like ending single family only zoning that allows more multifamily housing without these discretionary approval processes that can hold up construction and can create delays in construction. And along those lines, making it easier to build smaller units like accessory dwelling units, or being able to place manufactured housing, can all help chip away at this affordability crisis. We also see sort of in between subsidies and then this market rate just allowing for multifamily and other types that you can create incentives for affordable housing and communities as well. And that can be done through things like density bonuses, by expediting reviews on affordable units, or, you know, I mentioned those parking requirements, if you have reduced parking requirements. There are ways you can manipulate local zoning in the local process to sort of grease the wheels for affordable housing and to make it less expensive. So those are sort of the three components that would get at different rungs of the affordability ladder in some respect. And we’re seeing that being adopted in some places, we just need it much more broadly.

Kimberly Adams: This is indeed a crisis; we keep talking about the affordability crisis for housing. What are the ripple effects to the broader economy of this shortage of affordable homes, capital A and lowercase A affordable?

Whitney Airgood-Obrycki: One of the things that I studied and that we look at at the center is, what it means for a household if you’re spending more on housing? And I think that that has these broader implications for the economy. So households who are cost burdened, and who are spending 30 to 50, or more percent of their income on housing, are not spending on other things. So they’re making tradeoffs on basic necessities like food and healthcare, it’s more difficult for them to build up savings for an emergency. So you add a lot of instability to households. It’s harder to save up for a down payment so to the extent that we want to support homeownership, the rental crisis is a real problem for that as well. And then these households just have less disposable income to spend in our local economy on other goods and services. We look at a stat frequently, which is how much households have after paying for housing to meet all their other expenses and to pay for other things that they might want to do with their lives. And when we look at households who are, you know, on the lower income spectrum, making less than $3,000, after paying for housing, they only have less than $500 a month left for everything else in their household, right? So that has real implications for household stability, for their health, their well-being. And I think just if we think about a comfortable standard of living, you just can’t make it on that much.

Kimberly Adams: Wow. Whitney Airgood-Obrycki, thank you so much. Senior research associate with Harvard’s Joint Center for Housing Studies. It’s a little grim, but I definitely feel smarter.

Whitney Airgood-Obrycki: Thank you both.

Kai Ryssdal: Thank you so much. Oh man, it is a little grim? It’s totally grim.

Kimberly Adams: 500 bucks, like, for a whole month after paying for your housing. That’s not enough. And yet people are out here doing it and finding a way to survive every day. Oh boy. Um, yeah, let us know what you think. What’s your housing ratio? You know, is it 30%? Is it half? Very curious where folks stand on that. Our number is 508-827-6278, also known as 508-U-B-SMART. You can send us a voice memo at makemesmart@marketplace.org. And we’ll be right back.

Kai Ryssdal: And news! You go first.

Kimberly Adams: Yes, so I do have a housing related one. So I saw this tweet thread from Heather Vogel, who is a reporter at ProPublica, investigating rental housing specifically. And she points to this report out from the House Financial Services Committee looking at the single-family home rental market. So these are people or companies that own houses and then rent them out. And particularly, they’re looking at all of these homes that were bought up by like, big corporations and investment firms and things like that. And we’ve talked several times, and Amy’s talked about this, and it comes up a lot that people are complaining that they can’t buy houses because they get bought up with these cash offers by these big rental companies, which takes a lot of these starter homes off the market. And so the House Financial Services Committee put out this report, looking specifically at this question, just to see how bad it was. And some of the takeaways are really astonishing. So yes, these companies bought up a ton of single-family rental homes after the financial crisis, when houses were costing almost nothing. And that took a ton of houses off the market. But also reading here from the report: These companies – there’s like five big ones in particular – they grew significantly over this time span of the survey, which was between March 31, 2018, and September 30, 2021, in aggregate 27% net growth of their housing stock. And so that’s a total net property gain of almost 77,000 single family rental homes that these companies bought in this space. And a lot of times, they’re raising money from private investors for those cash offers, so they don’t have to go through the process of getting a mortgage. They also tend to purchase in neighborhoods with significantly larger black populations than the national average. The average population represented across the company’s top 20 zip codes was 40.2% black, which is over three times the black population in the US. They tended to purchase in neighborhoods with more single mothers than the national average. And there’s just a bunch of details in here that’s really interesting. So when we talk about the lack of affordable housing, and where did all the houses go, a lot of them got bought up by these companies. So.

Kai Ryssdal: Yeah, oh, man. You’re done?

Kimberly Adams: It’s just quick acknowledgement of just the horrible story in in San Antonio of those poor people, poor poor people, who were trying to get into this country and died. At least 50 people, as of the last numbers I saw, were found dead in this abandoned 18-wheeler. And, you know, just a prayer. That’s just really sad and reminder of the lengths that some folks will go to to try to get into this country with a lack of legal options, or limited legal options at the moment.

Kai Ryssdal: Yeah, okay, so total change gears. I’m gonna get a little geeky here. There’s a great piece in The Wall Street Journal today about inflation expectations and how we go about figuring that out. University of Michigan actually goes and asks people what their inflation expectations are. The catch is that we have no idea what we’re doing. We don’t have a guess, we don’t have an estimate, we let partisanship influence our decision making. It’s an amazing piece. It’s also incredibly important because this is what Powell and the gang at the Fed, one of the many things they look at when they start thinking about rate hikes. So if you want to understand a little bit more about how Jay Powell and the Federal Reserve think about inflation expectations, read this piece. We will definitely put it on the show page. It’s really interesting. But the bottom line is Americans have no clue. We’re just making stuff up.

Kimberly Adams: I had my own little reality check this morning because you know, I’ve got my niece staying with me so I rented a car to get her to and from camp. And I wanted a compact car, but they didn’t have one available, so I got a free upgrade to an SUV, which I had to fill up with gas this morning.

Kai Ryssdal: You did.

Kimberly Adams: Really reevaluating the whole upgrade situation,

Kai Ryssdal: Totally, totally. Second prizes. Yeah. Anyway. All right. Here we go. Let’s do some mail, shall we?

Kimberly Adams: All right. First, we have a listener voice message about the Roe decision.

Janet: Hi, this is Janet. I live in Springfield, Virginia, just inside the beltway. And I realized I’m sort of in a state of just stunned amazement that the world I lived in for basically my entire life has been overturned, but I recognized it. It’s exactly how I felt in November 2016. And I realized what I did was that, was I worked very, very hard in Virginia to get an amendment passed to fix redistricting, so that it cannot be a political activity in Virginia. I was one of many. And I just pray I can find something similar to do with this feeling about Roe. We need to have health care for women. Y’all are a lifeline. Thank you. Bye.

Kimberly Adams: Just for some context, that November 2016 – just on the off-chance people forgot – is when President Trump won election. I’m guessing that’s what she’s referencing there. Yeah, you know, there’s a lot of people are organizing to take action in this moment and on all sides of the issue.

Kai Ryssdal: Okay, email from John wrote after last week’s episode, where Amy and I were talking about mortgage rates. Here’s what he says, quote, we bought our first house in 1977 for $49,000 in Portland, Oregon. We had a 9% mortgage, which was considered a reasonable rate at that time when we had twins in 1980, John goes on, we consider moving to a bigger house. However, interest rates in the early 1980s were almost 20%. Yeah, yeah. As bad as people think it is now. It was really bad in the early 1980s, man.

Kimberly Adams: When was the first time you ever bought a house?

Kai Ryssdal: Oh, I didn’t buy a house till I was married with two kids. It was 2001. Yeah.  What were the interest rates like?  I don’t know, four or five, maybe? I would guess. It seemed reasonable to us at the time. I don’t know.

Kimberly Adams: Yeah. A lot of people just have no experience with interest rates beyond the single digits. I was chatting with a friend of mine the other day, reminiscing about CDs when we were kids, not kids, but like young people. And they’re like, put your money into a CD! And when it matures, you can reinvest it, and you will get like six and a half percent on CDs. I have not heard anybody getting CDs – certificates of deposit, by the way.

Kai Ryssdal: Yes. Wise to point that out.

Kimberly Adams: Okay, before we go, we’re gonna leave you with this week’s answer to the make me smart question, which is, what is something you thought you knew, but later found out you were wrong about?

Rick: Rick from Fort Worth, and one thing that I thought I was right about that learned I was absolutely wrong, was that two spaces after a period is correct grammar. I’ve come to learn that I am wrong, was taught wrong, and as a teacher have told my students incorrect information. So that’s one thing I thought I knew that turns out I didn’t,

Kai Ryssdal: I will die on this hill, two spaces after a period. Rick, I’m sorry, man.

Kimberly Adams: So look, I saw this when I was prepping for the show. And I got really, I got in my feelings about it. And I went down this deep internet rabbit hole about this. And I was definitely taught two spaces after the period growing up. But like, the AP says no, a lot of the modern style guides say no. And I was like, where did this come from? And I found this one article – and now I have to go back and find it so I can share with everybody else – that said that the two spaces after the period thing came from old school typewriters, when every single letter, regardless of how wide it was, took up the same amount of physical space on the page. And so if you had a wider letter or a more narrow letter, like it’s still, it would leave a weird spacing. And so you needed that extra space after the end of a line to improve readability. And it made it easier to read typed things because of the spacing and the typeface and everything like that. And so that’s where the two spaces came in. But now on computers, they sort of squish the letters together. So if it’s an L, you know, the next letter that’s going to come, the E – you know if it’s leave, because that’s the word I’m staring at on the page – is going to come right after the L as opposed to having a little gap in between. So there was a reason for it. And that reason is less so now. But when you’re curmudgeonly, like you and I, we don’t like change.

Kai Ryssdal: Or your kids get off my lawn. Yeah. Get out of my tight face. Yeah, two spaces after a period, two spaces after a period is all I’m saying. But look, if you think otherwise, well, number one, you’re wrong. But number two, call us, write us, let us know. Voice Memo through our email at makemesmart@marketplace.org. Or leave us a message 508-827-6278, 508-U-B-SMART. It’s two! It’s two!

Kimberly Adams: I feel about this the way I felt when they say Pluto is not a planet.

Kai Ryssdal: Oh I know, right?

Kimberly Adams: Make Me Smart is directed and produced by Marissa Cabrera. Olivia Zhao is our intern. Ellen Rolfes writes our newsletter.

Kai Ryssdal: Today’s program was engineered by Juan Carlos Torrado. Mingxin Qiguan is gonna mix it down later. Ben Tolliday and Daniel Ramirez composed our theme music. Senior producer is Bridget Bodnar. Donna Tam is Director of On Demand. Marketplace Vice President and General Manager is Neil Scarborough. I don’t know who of the three of them uses two spaces after a period. My guess would be all of them. My guess would be all of them.

Kimberly Adams: Yeah, is it like a generational thing?

Kai Ryssdal: It might be? It might be like where you first learned how to type, right?

Kimberly Adams: Yeah, yeah, maybe.

Kai Ryssdal: Bridget says one space on Slack. Bridget, you’re fired. Oh, no, wait, sorry. I can’t do that, can I?