Guest Blog: Housing Policy Should Be About People, Not Product
By Alan Mallach, Senior Fellow, National Housing Institute, Center for Community Change, and the Brookings Institution
Most low-income households in the United States live in private-market housing. American housing policies, though, rather than focusing on the needs of that majority, have focused disproportionately on providing a product; that is, using public funds to create a housing stock of units dedicated to lower income occupancy, separate from the private market. While this has created some attractive, well-built housing—and some not so attractive—for a small percentage of America’s low-income families, it does nothing for the rest, while the effect of that housing on their neighborhoods is uneven and often problematic. We have created an affordable housing lottery that benefits only a handful of eligible households—many of whom could find decent housing in the private market without public help.
With public resources scarce and private market housing in most parts of the country affordable to more households than ever before—and likely to remain that way for many years—it’s time to reassess whether creating product actually helps the most people in the most cost-effective and responsible way, or has the most positive impact on the communities where they live.
House prices have been dropping in most parts of the country for over four years. Away from “hot spots” like the New York and San Francisco areas, most homes are highly affordable to most—although not all—households. Furthermore, vacancy rates are at all-time highs. Roughly 80 percent of Americans live in relatively affordable, high-vacancy metropolitan areas.
In most metropolitan areas, families earning 60 to 80 percent of the area median income (AMI)—the target for most public or nonprofit homeownership programs—can find a wide variety of homes they can afford on the private market. Every year for the past decade, on average over a million lower income families became homeowners with no public or nonprofit assistance. However, lower income homeowners are much more likely to have their homeownership spells cut short than other homeowners, losing much or all of the value of that homeownership. Even with counseling and reasonable mortgage terms, the smaller the downpayment, the greater the likelihood that the family will lose its home.
This picture strongly suggests that when the public sector provides funds to help people become homeowners, either by giving them downpayment and closing cost money or by subsidizing the price of the house, much of that money goes to families who would have become homeowners anyway, while much of the rest goes to poor candidates for homeownership. Few net stable new homeowners are created. We would do better to offer buyers counseling and education but otherwise let people become homeowners—or not—on their own and use the dollars saved to build a robust support system to help them stay homeowners. That system could include help with home improvements and repairs, access to ongoing counseling and information, and emergency assistance for families at risk of losing their home. The more we do that, the greater the benefits—social as well as financial—for all lower income homeowners, not just the select few who win the public money lottery.
Rental housing also needs a fresh look. More low-income units are urgently needed in Stamford or Palo Alto, where high demand and development constraints make housing affordable to families earning 50 percent of AMI rare. More units for people at 50 percent of AMI are not needed in Dayton, where the average private market rental is affordable at less than 40 percent of AMI and the rental vacancy rate is 13 percent, or Las Vegas, where landlords are desperately looking for people to fill apartments at rents affordable at 40 and 45 percent of AMI. In cities with too many affordable rentals, new affordable rental projects risk cannibalizing the private market, pushing habitable units into abandonment.
Read the rest of this article at Shelterforce.
Alan Mallach, senior fellow of the National Housing Institute, is the author of many works on housing and planning, including Bringing Buildings Back and Building a Better Urban Future: New Directions for Housing Policies in Weak Market Cities. He served as director of housing and economic development for Trenton, N.J., from 1990 to 1999. He is also a fellow at the Center for Community Progress and the Brookings Institution.