Chairman Allard, members of the Subcommittee, good morning. I am Sheila Crowley, President and CEO of the National Low Income Housing Coalition.
The National Low Income Housing Coalition is a non-profit membership organization representing individuals and organizations that are committed to ending the affordable housing crisis in America and to assuring decent housing in healthy neighborhoods for everyone. Our members include non-profit housing providers, homeless service providers, fair housing organizations, state and local housing coalitions, public housing agencies, private developers and property owners, housing researchers, local and state government agencies, faith-based organizations, and residents of public and assisted housing and their organizations. On behalf of our membership, I thank you for the opportunity to offer our perspective on housing unaffordability and the federal response to the affordable housing crisis.
There are many vantage points from which to analyze the affordable housing crisis and you have heard some of them today. What is important to take away from the testimony today first is a grasp of the high level of consensus that the United States indeed is experiencing a housing crisis, which has serious implications for the health of our families, our communities, and our economy. Second is an understanding that the affordable housing crisis is nothing more than a problem to be solved, and like so many other challenges we have faced as a nation, Americans are capable of solving this one. We have the knowledge, skills, and resources necessary to do so. What we need is public will and courageous leaders.
The Dimensions of the Affordable Housing Crisis
I would like to add the analysis of the crisis in housing affordability of the National Low Income Housing Coalition to the data that you are assembling today. Each year we calculate a measure we call the housing wage, that is, the minimum wage that a full time worker must earn per hour in order to afford the fair market rent for a two bedroom unit his or her community. We calculate the housing wage for every local jurisdiction in the country and demonstrate the mismatch between housing costs and income at the state and local level. Attached to my testimony is a chart that indicates the housing wage and several other indicators of the housing crisis in each state. For example, in Colorado, the housing wage is $12.38 an hour. A full time minimum wage earner must work 96 hours a week to afford the 2 bedroom fair market rent and 45 % of the renter households in Colorado are unable to afford 2 bedroom fair market rent.
The housing wage analysis helps us understand that we are talking about a crisis of national proportions, not one that is isolated to large urban areas or inner city neighborhoods or rural enclaves or aging suburbs. It is happening everywhere. Nowhere in the country can a full time minimum wage worker afford basic rental housing. No state escapes the unaffordability label. Some are just worse than others. Wisconsin has the dubious distinction of being the “most affordable” state where only 31% of the renters cannot afford the fair market rent; Virginia is the least affordable with 53% of the renters priced out of the rental market. The numbers are stark. But what does it mean to not be able to afford housing. One or more of the following happens. A family pays a precariously high percentage of its income for its housing and must scrimp on other necessities like food and medicine. Or the adults in the family work two, three, or more low wage jobs and have precious little time left over to devote to family and parenting responsibilities. Or they are forced into substandard or overcrowded housing, paying rent to unscrupulous landlords who profit from the severe housing shortage affordable for low income people. Or they simply cannot pay the rent or mortgage and are threatened with eviction or foreclosure, gain poor credit records, and in some cases, spiral down into homelessness.
We are increasingly aware that the high rate of mobility among low income families, driven in large part by the lack of affordable housing contributes to poor school performance by children who shift from one school to another and never catch up. In the age of standardized tests as the primary indicator of academic achievement, these kids do not have a chance at success. We all tacitly understand the centrality of stable housing in our ability to do our jobs and raise our families. If we ponder even for a moment how we would cope if maintaining our housing was a daily struggle, we can easily understand the human dimensions of the affordable housing crisis. We know that receipt of federal housing assistance contributes to housing stability for formerly homeless families and is associated with success at moving from welfare to work. It is a good investment in American families.
Causes of the Affordable Housing Crisis
Any number of causal assertions can be made about the affordable housing crisis with validity. Growing income inequality and a housing market and industry that are most responsive to those on the high end is a good place to start. Stagnant benefit levels for elderly and disabled people on fixed incomes have to be factored in, as does persistent poverty of low-wage workers in most states the wake of welfare reform. Depletion of the assisted housing stock through prepayments and opt-outs of privately owned assisted units and demolition or conversion of public housing, some 237,000 units by one count, compounds the problem. The lack of incentives for developers to invest in low cost housing is a factor, as demonstrated by the stiff competition for the limited number of Federal Low Income Housing Tax Credit, while the private market low cost housing stock continues to shrink with gentrification and revitalization programs. The decline of the federal commitment in low income housing cannot be ignored as a cause to the affordable housing crisis. In 1977, the budget authority for assisted housing was $65 billion, over twice what is being considered today.
The impact of regulatory barriers, which are addressed in S.1333 and H.R.1776, must be taken seriously. In the communities with which I am familiar, there are few things in housing programs that are more frustrating that the Byzantine nature of local building and zoning ordinances. Anyone who has developed property can attest to the surreal experience of being at the mercy of a local building official whose sole purpose seems to be to impede your progress. Maybe there is a place where this isn’t so, but I have yet to hear about it. However, it is critical to separate out intent from implementation and not lump good ideas with poor administration of them. Further, we also have to resist succumbing to false dichotomies that force us to compete among important goals. The affordable housing crisis can be solved without compromising on hard won civil rights, health, environment, and worker protections.
Three issues seem to dominate the affordable housing discourse today. The first is the emphasis of late on the affordable housing crisis among moderate income workers, and the corollary attention being directed to special assistance targeted to certain kinds of public servants, mainly teachers and police and firefighters. We know that part of translating a social condition into a social problem that attracts the attention of policy-makers is when it begins to encroach on an increasingly more prosperous population. It is not just that more people are affected; it is that more people who are in the social and political mainstream are affected. The onset of the contemporary housing crisis can be traced to the early evidence of homelessness in America twenty plus years ago. What we now have is a continuation of homelessness, desperate housing conditions for the very poor, and a growing inability of the American workforce to pay for their homes. This means that we must change our definition of the problem to a structural flaw in the American economy, as opposed to the personal shortcomings of people on the margins. The mistake will be if we limit our attention to those in the upper strata of the needy populations and think we have solved the problem. We will have reduced some of its symptoms, but by no means will we have solved the affordable housing crisis. The advent of housing affordability problems of modest wage earners should be the catalyst for structural reform, not small fixes.
The second issue I want to raise is the perception of homeownership as the panacea and rental housing as the problem. Home ownership is the idealized housing status in America and public policy aggressively promotes it. (Indeed, while the federal budget authority for housing assistance is projected at $26 billion in 2005 at constant dollars, housing tax expenditures will be $123 billion in 2005, the vast majority of which is property tax and mortgage interest tax deductions.) While the choice of homeownership should be extended to as many people as possible, we should not do so to the detriment of rental housing and to the detriment of people for whom homeownership is not the best answer. A May 2000 report entitled The Social Benefits and Costs of Homeownership by the Research Institute for Housing America, the research arm of the Mortgage Bankers’ Association, is a critical review of the literature about homeownership. The report concludes that although homeownership remains the housing tenure of choice for most people, limitations of the research on homeownership mean that the social benefits may be overstated and that more research is needed to differentiate when home ownership is a good for a family and when it is not. For people who are climbing out of poverty or low income people whose earnings are seasonal or otherwise subject to variability, home ownership may have adverse consequences. A housing market that is responsive to the housing needs of people at different points on the economic spectrum and at different places in the human life cycle (young adults, families, older people, disabled people) has to have a range of housing choices and rental housing is an essential element of our housing system.
I also want to comment briefly about the continuing debate about what level of government should address the housing crisis and the role of the federal government vs. state government. NLIHC has surveyed and analyzed data from every state on their level of investment in rental housing subsidies for low income people and will issue a report shortly. We have found that about half the states have some sort of tax relief for very poor elderly or disabled renters. The other dominant form of rental subsidy is one time emergency assistance or temporary assistance that is offered, in some cases, until federally assisted housing becomes available. Most states simply rely on or at most supplement federally funded programs. Well-intended people can have legitimate disagreements about what should be done at what level of government, but the federal government has always been and will always be the financial engine of affordable housing for low income people. Either by direct appropriations or tax expenditures, the federal government has to fund or incentivize to subsidize the difference between what housing costs and what low income people can afford.
There are two features of HR 1776 that I want to commend as positive steps forward. One is the incentive for regional housing plans, which will encourage cross-jurisdictional collaboration on housing. If local government officials act on housing on a regional basis, they will expand housing choice, reduce the concentration of poverty in cities, use their federal resources more efficiently, and be compelled to analyze their own regulatory barriers through the lens of their neighbors. The other noteworthy provision of HR 1776 is the down payment assistance pilot program for two and three family residences, which provides incentives for more owner-occupied rental housing that both adds homeownership opportunities for low income people who are ready to take on the responsibility and adds desperately needed rental housing units. However, please note that a serious impediment to the development of this time-tested form of housing is local zoning ordinances that promote free-standing, single-family homes. Incentives for local government to alter rigid exclusionary zoning will also have to be part of this pilot program.
Another major piece of housing legislation that you will take up this year is Senator Santorum’s S. 2733, which includes the proposal for preservation matching grants first introduced by Senators Jeffords, Kerry, Grams, Sarbanes, and Wellstone as S. 1318 last year. This is an essential component of the federal agenda to address the affordable housing crisis. We are working with our state and national partners to preserve as much of the assisted housing stock as possible and prevent further departures from the assisted housing portfolio as contracts expire. We appreciate the support for preservation of Section 8 properties that Senator Allard expressed in a recent article in The Denver Post. We have some preservation tools in place, including the Mark Up To Market Program instituted last year. However, funds are needed to make capital improvements and to facilitate transfer of properties to socially-motivated, tenant-endorsed owners who will preserve affordability for the long term. Providing federal funds for state and local governments to match with their own funds is the right kind of collaborative housing policy. Preservation matching grant legislation passed the House by a huge bipartisan majority last year. We urge that the Senate do the same this year and look forward to working with the Senate Banking Committee on passage of S.2733.
Another important tool to address the affordable housing crisis is the establishment of a national housing trust fund, to be funded with the excess revenue produced by the FHA program. Using revenue generated by one federal housing program to address unmet housing needs is sensible housing policy, and should be a priority of a Congress that intends to address the affordable housing crisis.
Finally, it goes without saying that funding of our existing federal housing programs needs to be maintained and expanded if we are serious about addressing the affordable housing crisis. Flat or reduced funding for our essential housing programs, HOME, Public Housing, CDBG, Section 202, Section 811, and no new housing subsidies, at a time when the need is severe and the federal budget surplus is gushing makes no sense. As those responsible for authorization and oversight of federal housing programs, I urge you to advocate that they be funded at a level that will make a difference.
Thank you again for the opportunity to be part of the discussion today.
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