News Archives InfoFax Affordable Finance Initiatives research mainpage <Back to Infofax Archive Page>

9/25/01: The following is taken from the excellent "Raise the Floor; Wages and Policies that Work" by Holly Sklar, Laryssa Mykyta, and Susan Wefald. For more information, the web site is This is the second excerpt taken from the publication. Enjoy.


More than half a century ago, Congress passed the National Housing Act with the goal of assuring a decent home and suitable living environment for every American family...The goal of assuring a decent home to every American family has grown more distant. As the Center for Budget and Policy Priorities reported, "In 1970, the number of low-cost rental units exceeded the number of low income renters by 300,000. By 1995, there were only 6.1 million low rent units for the nation's 10.5 million low-income renter households, a shortage of 4.4 million units."

U.S. HUD reports that 4.9 million very low income households (with 10.9 million people, including 3.6 million children) had "worst case needs" in 1999. These are households without housing assistance with incomes below 50% of the local area median income who pay more than half of their income for housing (rent and utilities) or live in severely substandard housing. The nearly 5 million households with worst case needs do not include people who are homeless or living in shelters. Eight out of ten "nonelderly, nondisabled" households with worst case needs have earnings as their primary source of income.

The generally accepted standard of housing affordability is that housing should cost no more than 30 percent of income. Yet, three out of four working poor renters spend more. The latest survey of cities by the U.S. Conference of Mayors found that "low income households spend an average of 51% of their income on housing". Even at a wage of $8 per hour, 30% of annual income would equal $4,992, or $416 a month - considerably less the annual rent of even a one-bedroom apartment at the HUD Fair Market Rent.

The National Low Income Housing Coalition reports that almost half of all renter households and one-fourth of all owner households have either moderate or sever housing problems....The affordable housing crisis has been driven by rents increasing 1.5 times the general inflation rate and home purchase prices rising at twice the rate of inflation coupled with low wage jobs and severely inadequate government housing programs. In 1999, for every 100 renter households with incomes below 50% of the local area median income there were only 70 units that were affordable and available (either vacant for rent or already occupied by very low income renters). There were only 40 affordable and available units for every 100 extremely low income renter households with incomes below 30% of local median.

The affordable housing crisis has take a big toll. On any given night, some 750,000 people are homeless; many more are the "hidden homeless," missed in varied counts. Over the course of a year, some 2 to 3.5 million people experience homelessness for some period of time. More than one third of the homeless are families with children.

In its 2000 survey of 25 major cities, the U.S. Conference of Mayors found that requests for emergency shelter by homeless families had risen 17% during the past year; 27% of the requests went unmet. In half of the cities, "families may have to break up in order to be sheltered." The Mayors also found that more than a fourth of the homeless were employed.

The Mayors' report observes, "Lack of affordable housing leads the list of causes of homelessness identified by city officials. Other causes cited, in order of frequency, include low paying jobs, substance abuse and the lack of needed services, mental illness and the lack of needed services, domestic violence, poverty, and changes and cuts in public assistance."

Housing Assistance Now Mostly for the Haves

The biggest government support for housing comes in the form of tax deduction for mortgage interest on owner-occupied first and second homes. Much of the tax write off goes to higher income families. Incredibly, the more you can already afford to spend-up to a cap of $1 million (previously $5 million)- the more the government subsidizes you.

Tax paying low-income renters actually subsidize the vacation homes of high-income homeowners. As the New York Times reported in 1999, for each dollar going in tax savings from mortgage interest deduction "going to the average taxpayer making $200,000 or more, the average tax payer in all lower income groups saves just 6 cents."

Most low wage workers cannot afford to purchase homes and take advantage of the mortgage interest and property tax deductions that significantly reduce net housing costs for homeowners, nor do they benefit as homeowners do from capital gains exclusion on home sales. Taking all housing benefits (including tax expenditures as well as rental and all other assistance) into account, 63% of which goes to households in the top fifth of the income distribution compared to 18% for the bottom fifth. Less than 20% of households in the bottom fifth receive housing assistance.

For the fiscal year ending September 30, 2001, the mortgage deduction adds up to about $61 billion. That's double the total spending by U.S. HUD; more than 4 times the Section 8 rental assistance budget; and 19 times as large as the Low Income Housing Tax Credits provided to developers of affordable housing.

Fewer than one out of four families eligible for all forms of federal housing assistance (including public housing, Sec. 8, etc.) actually receives it. HUD reports. Unlike the mortgage interest deduction, federal rental assistance is means-tested and subject to appropriations so inadequate that most eligible people don't receive help. Waiting lists for housing assistance are often years long..

Section 8 housing vouchers address affordability by providing a subsidy for eligible renters equal to the difference between 30% of a household's income and the payment standard established by the local public housing authority, according to HUD guidelines (the range is 90-110 percent of the fair market rent, but exceptions are allowed). However, numerous barriers exist. Currently there are far fewer vouchers in circulation than the number of households with worst case housing needs.

Even with voucher in hand, a family may not be able to use it. If an available apartment exceeds the payment standard, a tenant must pay the additional rent, to 40% of his or her income-despite the government's own affordability standard of 30% of income. In tight housing markets (such as South Florida) there may be no apartments available that meet even the 40% requirement, thus making the voucher unusable. In addition, landlords often illegally discriminate against voucher holders.

To make matters worse, HUD has adopted a new "Mark to Market" policy to mainstream more than 1 million subsidized private rental units with Section 8 contracts (expiring in the next 10 years) into the conventional real estate market without subsidies or use restrictions. This policy "is the antithesis of affordable housing."

It is essential we strengthen the Section 8 voucher program by increasing voucher numbers and payment amounts to reduce the cost of housing for low-income families and also facilitate the transition of families off welfare. There needs to be greater encouragement of landlords to participate in the program, and enforcement of prohibitions against housing discrimination. The National Housing Institute estimates that housing vouchers for all eligible low-income households would cost about $50 billion a year-much less than the costs of the very popular mortgage interest deduction and small potatoes compared to recent tax cuts.

However, a concerted program to increase the affordability of housing for low income families is insufficient if little is done to increase the availability of affordable housing. In the words of former HUD Secretary Andrew Cuomo, "Housing vouchers alone are not a housing program for the nation. We also need to produce units...We need a production program that works."