New data from the National Low Income Housing Coalition (NLIHC) has revealed that the Los Angeles-Long Beach metro area is the worst in the state in terms of affordable and available units for its most vulnerable renters while California is second only to Nevada as the most housing-poor state in the nation.
When it comes to evaluating the U.S. as a whole, 10 percent of households are defined as Extremely Low Income (ELI), meaning they have a household income at or below 30 percent of any given area’s median income.
Of these 11.2 million ELI renters, 71 percent are extremely rent burdened, meaning that more than half of their income goes toward rent; additionally, ELI renters account for 72.7 percent of all severely cost-burdened renter households in the United States. By comparison, 32 percent of Very Low Income, 8 percent of Low Income, and 2.3 percent of Middle Income renter households are severely cost-burdened.
Nationwide, there are 35 affordable and available units for every 100 ELI renters.
Honing in on California and specifically our region, things actually get worse: there are 22 affordable and available units statewide for every 100 ELI renters and, in the Los Angeles-Long Beach region, that drops to 17, second to the Las Vegas metro area (which has 10 units for every 100 ELI renters).
“The severe shortage of affordable homes faced by the lowest income households is systemic,” said Dan Emmanuel, Senior Research Analyst for NLIHC. “Absent public subsidy, the private market is largely unable to produce new rental housing affordable to these households or maintain the existing affordable stock. The rents the lowest income households can afford typically do not cover the costs of development and operating expenses, so new rental housing development is largely geared toward the higher end of the market.”
This echoes data from this year’s study conducted by Harvard’s Joint Center for Housing Studies, which found that units renting for $2,000 or more per month increased by 97 percent while those under $800 decreased by two percent. (And when it comes to our region, a household that even manages to achieve the area median income can afford only 11 percent of recently sold homes, contributing toward the region’s title as having the nation’s lowest home-ownership rate while also having the nation’s highest increase in homelessness).
What this ultimately means is that subsidies, either state or federal, are key to keeping housing costs down: since the private market doesn’t build the affordable housing needed and rental assistance insufficient at times, low-income families and individuals rely on housing that “filters down,” according to Emmanuel; that is, housing that frees up as it becomes older and less desirable to those with higher incomes.
“The filtering process, however, fails to produce a sufficient supply of affordable rental homes inexpensive enough for the lowest income renters to afford,” Emmanuel said.
This process fails because the market creates a double-edged sword: in strong markets, property owners are incentivized to upgrade or redevelop their properties to appeal to higher income households while in weaker markets, property owners tend to abandon properties or convert them when rent collection fails to cover operations and maintenance.
Hence the essentiality of subsidies.
“Making matters worse, President Trump is proposing sweeping changes to further restrict and reduce critical federal investments that help extremely low income renters,” Emmanuel said. “The president has again proposed severe spending cuts for the upcoming fiscal year. If enacted, the president’s budget request would lead to the largest reduction in affordable housing and community development investments in decades.”
On top of this, ELI households have the most pressing needs: 40 percent of them are disabled or seniors, with only 44 percent in the labor force.
“Extremely low-income workers are particularly challenged,” Emmanuel said. “Nationally, a worker earning the federal minimum wage needs to work an average of 94.5 hours per week to afford a modest one-bedroom apartment.”
But even with affordable units available, not all of the households occupying them need an affordable unit. In fact, one of the more fascinating aspects of the research conducted by NLIHC is that nearly half of the 7.5 million available homes that are accessible to ELI renters are occupied by higher income households.
The solutions are not as complex as one would think. NLIHC suggests two very direct solutions: increase capital investment in housing and increase rental assistance programs.
“The lack of decent, accessible, and affordable housing, especially among people with the lowest incomes, is a significant barrier to housing and economic stability and other societal benefits,” said Andrew Aurand, NLIHC Vice President for Research. “Our nation must make the critical investments in affordable housing needed to help the economy, our communities, families, and children thrive.”