The Crisis in Affordable Housing: Why It Is Happening and What To Do About It

Beginning in the mid 1970s, I have been involved in developing affordable housing (and seniors, market rate housing). I started my housing career working for the Episcopal Diocese of Washington as the project manager for a huge, mixed income and mixed age community to be located on 624 acres in Prince George’s County outside of Washington, D.C. That development never got built because of zoning opposition, but St Mary’s Court did. A 140-unit, HUD Section 202 affordable housing community for seniors, which opened in the late 1970s, Saint Mary’s Court is located at the edge of the GW campus and within a five-minute walk to the Kennedy Center. The community serves a diverse community of low income seniors, provides a full range of services, and remains my favorite affordable housing community. This was followed by a three year stint at the National Corporation for Housing Partnerships where I was the Director of Development, responsible for developing about a dozen   low income housing communities in the DC/Baltimore region, followed by 25 years at Howell Associates, a consulting company which I formed, which performed market studies and helped affordable housing and market-rate seniors housing throughout the country get built and occupied. (In 1998 the company was sold to ZA Consulting.) The last couple of decades have been devoted mainly to lecturing on affordable housing finance at the University of Maryland, teaching a seminar on affordable housing as an adjunct professor in the Honors College at George Washington University, and serving on several affordable housing boards. It has been, as they say, quite a ride. Here is what I have learned:

  1. The affordable housing crisis in this country is really an income crisis. While in 2023, some gains were made toward narrowing the gap between the rich and everyone else, beginning in 1980, with the emphasis on deregulation and tax cuts, the median household income adjusted for inflation has increased only modestly while strong increases have occurred for the top 10 percent of households with extreme increases for the top one percent—and the most for the top .1 percent. The rich are getting richer while others are struggling just to stay even. About 25 percent of all households in the U.S. had incomes in 2022 below $35,000. These are the households most in need of financial support and have been the focus of most HUD housing initiatives. Good luck on finding an affordable, market rate rental apartment with an income of $35,000 when the top rent you should pay should be no more than 30% of your monthly income including all utilities or about $875/month. The lowest rents are twice that amount in most large cities and almost triple that in the Washington metro area where the lowest rents for most two-bedroom apartments start at over $2,000. Reducing income inequalities should be a top priority of our country going forward. Increasing the minimum wage to a living wage of something closer to $25/hour is important and would contribute to increasing the pay of those working in the service sector and entry level jobs. These initiatives remain highly controversial, impact the economy, affect inflation, and are unlikely to happen without Democrats controlling the Congress and the Presidency, which would also appear to be a long shot. In 2024 we will be lucky to keep our democracy.
  2. We have the basic tools to address the affordable housing challenge. The major tool available today for helping people with low incomes afford decent housing is the federal “Section 8 Housing Choice Voucher Program.” The Section 8 program began in 1974 in response to the housing crisis at that time, the failures of public housing, and the civil disturbances of the late 1960s and early 1970s when cities were burning. Initially HUD awarded Section 8 contracts to private developers of affordable housing allowing developers to charge market rents and providing subsidies to cover the difference between the contract rent of the unit and the rent paid by the low income household. Under the Section 8 program, the renter household pays no more than 30 percent of its income for rent and utilities. (These were the type of properties I worked on in the 1970s and early 1980s.) The program produced well over a million units during its 10-year life but was discontinued in the mid 1980s due to high costs. Many developers who initially signed 20-year contracts to keep the community in the Section 8 Program have opted out as the time limits have expired and neighborhoods have gentrified. When project-based Section 8 was terminated, it was replaced by the Section 8 Housing Choice Voucher Program. Administered by local housing authorities, vouchers allow low income households to live in market rate, middle income housing wherever they want. They pay only 30 percent of their income for rent and utilities. The vouchers pay the landlord the additional amount needed to cover the market rent for the unit. There are many issues affecting the Housing Choice Voucher Program. Funds come from the federal budget and need to be reauthorized every two years; and most public housing agencies have very long wait lists. In some states and cities landlords are not required to count vouchers as income when determining eligibility or required to lease units to voucher holders if they do not want to. While over two million low income households now have vouchers (five million people in these households benefit), only about 25 percent of those eligible (with incomes below 50 percent of area median) are served by the program due to lack of sufficient federal funding. Many voucher holders end up staying in low income neighborhoods because they have difficulty finding suitable units in middle class communities. Some are not even able to use the voucher. While the program is not perfect, it is the best tool we have in enabling low income residents to find housing they can afford. Making Housing Choice Vouchers an entitlement like Medicaid, TANF, or SNAP (food stamps) would make a huge difference though it would require a lot more money from the federal government. (SNAP would probably be the best model since the first two are governed largely by state rules and regulations.)
  3. Building more housing remains an important goal. The country is experiencing a housing shortage due in part to covid-related factors, NIMBYism, higher interest rates, and lack of properly zoned sites to permit higher density housing. This applies to all types of housing but especially to low income housing, which invariably rallies the NIMBY crowd to show up in protest. Building new housing is also very expensive and faces huge challenges for the properties to be feasible and to attract capable developers. The main financing vehicle today for multifamily housing is the Low Income Housing Tax Credit Program (LIHTC), which raises equity capital from wealthy investors (mainly banks) by providing a dollar tax credit for every dollar invested. This program is not administered by HUD but rather by the U.S. Department of Treasury in partnership with state housing finance agencies, which issue tax exempt bonds to cover a portion of the costs. The program is very complex and can be described as the “real estate lawyers’ and consultants’ relief act,” but has been around long enough so that a cottage industry has evolved, which produces over 100,000 units of affordable multifamily housing annually. Some of the major developers are nonprofit corporations, which unlike what happened in many earlier HUD housing programs, are allowed to earn substantial developer’s fees, enabling these groups to remain going concerns. The LIHTC initiative, however, does not provide “deep subsidies” like the Section 8 program, but rather requires a property to discount rents so that tiers of pricing are targeted to households with incomes between 30%-60% of area median incomes. Very low income households with incomes less than 30% of AMI still need vouchers (from the housing authority) for them to afford to live in these units. Finally, the equity from investors and the mortgage financing from state housing finance agencies are usually not enough to cover all the costs involved. When this is the case, state or local jurisdictions are often needed to provide “gap financing,” which covers the difference between total development costs and the funds provided by investors and housing finance agencies. There is also much discussion today regarding the need to encourage adding new units in existing communities by allowing homeowners to construct “granny flats” in back yards, to add basement apartments, to replace single family units with duplex units where space permits, to encourage infill multifamily housing, and for new suburban developments to be higher density and mixed use. All are important pieces of the puzzle. While taken together they are not enough to “solve” the problem, they are making an important dent.
  1. Homelessness is the stickiest challenge of all. There are other reasons for homelessness besides not having sufficient funds to pay rent. The movement to shut down mental institutions began in the late 1960s. For many years most of these large institutions have ceased to exist. The idea was to replace these prison-like “hospitals” with community-based, smaller, health centers and group homes. Some of this has happened but not nearly enough to compensate for the vast number of beds that were eliminated. Typically, about two-thirds of homeless people are single persons, more men than women, and many with serious mental health or substance abuse issues. They need more than just housing. For many years the main initiative for providing housing for people with mental or emotional challenges was also to provide “transitional housing” where intensive social services were involved to help get people back on their feet to be able to live independently.  About ten years ago this initiative was phased out and replaced by “Housing First.” Under this approach, the goal is to get homeless people into permanent housing first and then provide social work and mental health support. For a number of years, I have served on the board of Housing Up, a faith-based nonprofit which provided transitional housing for many years and now under the Housing First initiative employs close to a hundred social workers serving approximately a thousand clients. They help homeless families find market rate housing (paid for by a housing grant from the DC government), and then stick with the family to help them access the services they need, find better paying jobs, help their kids in school, and, if needed, help the parent deal with mental health or substance abuse issues. The main failing of this program is that it is supposed to last only for only a year, assuming that by the end of the year the family will be back on its feet. Wishful thinking. The DC government is rethinking how to deal with the problem since it is now evident that one year is not enough to get people back to work. The District, however, does offer a similar program (“Permanent Supportive Housing”) which has no time limit and provides housing for those with mental, emotional and physical disabilities preventing them from working. In the meantime, tent encampments persist in the city, and the number of homeless families and individuals continues to increase. There is no silver bullet which will fully address this challenge, but surely there needs to be more permanent housing options to replace tents and more than one year in a conventional “Housing First” apartment before being tossed out. Shelters are available for those in desperation but do not have sufficient beds to meet the need, must be cleared out during the day, and are not pleasant for anyone or a long term solution.

We should be able to meet this challenge. We have decades of affordable housing experience and have tried many approaches starting with traditional public housing, evolving into project-based Section 8 housing, then to Housing Choice Vouchers,  to LIHTC properties, and from transitional housing to “Housing First.” Each initiative has had strengths and weaknesses. Each has had successes and failures, and yet the problems persist and are even getting worse. This is due largely to our society, which has become increasingly unequal financially. Social Darwinism continues to be alive and well. The housing crisis will not be fixed in a vacuum. Before the fix can happen, we must address the inequality issue where the very rich are getting even richer and the rest of us are holding our own at best while way too many are slipping. Part of the solution is more federal and state money—lots of it. But this won’t happen until we figure out a way for the rich and superrich to pay their fair share of taxes. This, of course, will play out in the political arena, and who knows how that is going to end up as our country is peering into an abyss as the 2024 elections approach.





2 thoughts on “The Crisis in Affordable Housing: Why It Is Happening and What To Do About It

  1. Thank you, Joe, for this wonderful summary. It is very helpful. It i so easy to get discouraged, but the need requires us to keep on keeping on. Sometimes things have to get worse before they get better.

  2. Thanks, Ward. Glad you are following the blog. Hope you will read my post today (April 22) and weigh in. I admit that I am walking on thin ice and need the help of a real theologian.

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