Subcommittee on Housing and Transportation

Hearing on "Affordable Housing Production and Working Families."

Mr. Chairman and members of the Subcommittee on Housing and Transportation, I want to thank you for the opportunity to appear before you today on the challenge of expanding the supply of affordable housing in this nation. My name is Bob Reid. I am the Executive Director of the National Housing Conference (NHC) and its research subsidiary the Center for Housing Policy. NHC was founded in 1931 and is the nation’s oldest and most broadly based non-partisan advocate of affordable housing. Its member corporations and organizations represent all elements of those who produce, finance and preserve affordable housing.

Over the last four years, the Center for Housing Policy has conducted extensive research on the housing needs of working families across the nation. Our first report, Housing America’s Working Families, which was published in June of 2000 and based on 1997 American Housing Survey (AHS) data, found that over 13 million families had a critical housing need — either they spent more than 50 percent of their income on housing or they lived in a seriously substandard unit. The most disturbing discovery in that report was that despite unprecedented economic prosperity, about 3 million households were working families with critical housing needs. These families earned between $10,700 a year (the equivalent of a full-time job at minimum wage) and 120 percent of the area median income.

We updated Housing America’s Working Families in July of 2001 and published Paycheck to Paycheck: Working Families and the Cost of Housing In America. That report used 1999 AHS data and found that one out of every seven American families (13 million) still had a critical housing need. Notable in the research contained in that report, however, was the fact that low- and moderate-income families made up 28.5 percent of the total number of working families with critical housing needs, compared to 23 percent previously, increasing from 3.0 million to 3.9 million families. Paycheck to Paycheck also provided an occupational wage analysis examining whether working families that earn the prevailing wages for five selected occupations (teachers, retail salespeople, licensed practical nurses, police officers and janitors) were able to pay reasonable costs for housing in the communities in which they live. We found that in the 60 largest housing markets across the country, retail salespeople and janitors were virtually shut out as potential homebuyers, and that individuals working in these same occupations were having great difficulty finding rental housing they could afford. While teachers, police officers and nurses fared slightly better according to our findings, there was still ample evidence to underscore the fact that a larger and more economically diverse number of American families were unable to locate decent affordable housing for their families. To illustrate this point in more detail, we have attached two charts which illustrate the plight of retail salespeople and janitors in Providence, RI and Denver, CO. Individuals in these occupations, according to our research, would need to pay multiples of their current salary to afford either a one- or two-bedroom rental unit or a median-priced home. Janitors, retail salespeople and other workers in other occupations we examined faced similar difficulties in many of the largest housing markets in this country.

Today, I am pleased to present to the Subcommittee the findings from our latest report, just released, Housing America’s Working Families: A Further Exploration. I would ask that the full text of this report be included in the record of these proceedings.

This report contains new and important findings on the housing needs of working families, including the following:

• One out of every seven American households (13 million) continues to have a critical housing need. This includes 3.9 million households who work the equivalent of a full-time job;
• Rising housing costs are the primary culprit, affecting homeowners and renters in nearly equal numbers;
• Critical housing needs are not just a "city problem." While four out of ten working families with critical needs live in urban areas, another four out of ten live in suburban areas, with the remainder living in non-metropolitan areas;
• Geography matters. Low- and moderate-income working families with critical housing needs are more likely than not to live in the more than two dozen metropolitan "hot spots," where high prices reflect the lack of affordable housing. These areas had monthly housing costs in the range of $735 to $1,167 in 1999, and include such places as Boston, Chicago, Honolulu, Los Angeles, New York, Trenton, Seattle and Washington, DC;
• These high-priced markets exact other costs from working families. Families are more likely to have longer commutes and are more likely to share housing or other expenses than families in lower-cost markets. They also are more likely to avoid high housing costs by living in crowded conditions and, to a lesser extent, living in poorer quality housing;
• Families with chronic housing needs tend to be more often supported by a single worker than any other group;
• Racial and ethnic minorities are overrepresented among working families with chronic critical housing needs, making up more than half (53 percent), compared with 42 percent of families with temporary critical needs, and 29 percent of families without any critical housing needs;
• Nearly a fifth (19 percent) of working families with chronic housing needs are female-headed families with children. Although having children does not distinguish working families with chronic needs from those with temporary needs, the number of children does. More than a third (36 percent) of families with children who have chronic housing needs have three or more children, compared with 25 percent of families with children whose housing needs are temporary.

Taken together, the findings in these reports elevate our concerns about the housing needs of low- and moderate-income working families. This group is growing in numbers, yet it has been for the most part, overlooked by existing housing programs. NHC believes that housing policies (and resources) geared to the circumstances of working families need to become part of our overall commitment to decent, affordable housing for all Americans. Addressing the housing needs of these families, however, should not be viewed as part of a zero sum game. Families at or near the bottom of the income ladder — who are either out of the labor market or only marginally employed — continue to have the highest incidence of housing needs.

NHC’s research over the past four years underscores and brings into sharper focus what those of us in the housing community have known for years. This nation does indeed have an affordable housing problem of crisis proportions. That said, it is more than unfortunate that this crisis is not well known and not well understood. News reports that trumpet record homeownership rates, increased housing starts and the overall strength of the private housing industry in an uncertain economy at best muddy the waters and at worst provide decision makers like yourselves with a false sense of security that all is well in America as it relates to housing. Our research indicates that all is not well.

Far more troubling than this, however, is the ongoing refrain here on Capitol Hill that "this will be a tight budget," and "there is little or no room for increased domestic spending" and "there is no political support for increased funding for federal housing incentives." In fact, over the period of the last several years, we have, in a very real sense, painted ourselves into a corner such that marginal (and totally inadequate) increases in federal spending for housing have been and may yet this year be viewed as a "victory."

The National Housing Conference believes that the time has come to reach a new political consensus with respect to housing. This new consensus should be based upon an understanding and appreciation of the depth and breadth of the housing needs faced by American families. For far too long, housing policy at the federal level has been formed by long standing skepticism over failed housing initiatives, mismanagement at HUD and, more on the local level, the larger and less well-defined concerns often referred to as NIMBYism. The consensus that I am referring to must be based on a common belief that 13 million families with critical housing needs is unacceptable. This new consensus must stimulate a heightened sense of urgency and foster the political will necessary to address the housing needs of American families. We have the tools and we know what to do; now we must act.

With our nation battling terrorism and with national security concerns on everyone’s mind, elevating housing will not necessarily be the most popular thing to do. However, NHC’s members believe that national security, in its most basic form, begins in our homes and in our communities. In times of national crisis, we draw strength from our families and the stability that comes from a decent home and suitable living environment. Viewed in this manner and given the breadth of the current need for affordable housing that I noted earlier, housing, even in these troubled times, can and should be seen as a more important domestic priority and much more connected to our overall security interests here at home.

As I mentioned, it is our contention that we are not lacking workable programs or housing expertise. What we need quite simply are more resources to either directly fund or leverage the dollars necessary to produce more affordable housing or preserve the current supply of affordable housing. The federal dollars necessary to support many of the affordable housing programs we now have are simply not there in sufficient amounts to meet current needs.

This past year, NHC convened a series of roundtables with local housing professionals and community leaders in Minneapolis-St. Paul, New Orleans, Portland and Seattle. We published an overview of these roundtables in a report called Four Windows: A Metropolitan Perspective on Affordable Housing in America, 2001. I also would ask that this report be included in the record of these proceedings. In conducting these roundtable discussions, we were most impressed by the level of creativity and ingenuity that has been used in the effort to meet local needs for housing. In some respects, the absence of sufficient federal funding has fostered (by necessity) a level of creativity that has enabled or encouraged local levies for housing in Seattle, a Housing Trust Fund in San Diego, tax-based sharing in Minneapolis-St. Paul, and regional planning with respect to housing in Portland. While these communities and many others are attempting to find new ways to meet local housing needs, leaders in these communities will tell you that the demand for new affordable housing across a wide range of incomes exists in almost record numbers. The demand for new affordable housing in these and many other communities around the country is not being satisfied by the private market. In the main, the private sector provides a product for those whose incomes enable them to enjoy the freedom and security that comes with the ability to buy or rent at the high end.

During these roundtables there were several common themes with respect to the role of the federal government in housing that should be explored in greater detail by this committee, including:

• Federal conventions and standards create unintended consequences in delivering housing assistance;
• Despite the federal government’s stated intent to give states and localities considerable discretion in designing programs and directing resources, federal policies and regulations do sometimes unnecessarily limit localities’ ability to deal with local issues;
• Even where direct federal expenditures are not involved, federal policies can fail to take into account variations in state and local circumstances.

In specific response to your question about the need for more production of affordable housing for working families, we found that at all four roundtables there prevailed a common view that, as a nation, we must encourage and reward local and state efforts to produce and preserve affordable housing. After all, it is local tax, planning and zoning decisions that really determine what is done or not done about affordable housing. And it is precisely in those communities where affordable housing for working families is most needed that the most opposition to such housing exists.

The challenge, it was generally agreed, is to fashion the right kind of incentives that will encourage those communities to recognize and support the production and preservation of affordable housing. Proven tools to create affordable housing exist, such as inclusionary zoning, local levies, trust funds, employer support, regional strategies and other revenue raising techniques. Participants urged that we find ways to reward and support these absolutely necessary activities while recognizing the importance of local diversity and creativity. Federal and state incentives to localities to promote affordable housing could include challenge grants, funding formulae, consolidated plan improvements and tax benefits.

In summary, NHC is recommending that two actions be taken. First, that additional resources be provided for proven tools and programs that we currently have, including HOME, CDBG, and Section 8, etc. Second, we hope this Subcommittee will focus attention on state and local efforts to promote affordable housing and explore ways to make these activities more appealing through the use of incentives.

Mr. Chairman, this concludes my testimony. I would be happy to answer any questions you or other members of the Subcommittee may have, and NHC welcomes the opportunity to continue to assist you in the work of this Subcommittee.

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