Mixed housing gains, less affordable units

Mentioned in a prior post on the housing rental market, Harvard University's Joint Center for Housing Studies (JCHS) has recently released their annual report, The State of the Nation's Housing 2006. The report finds, "Although house price growth will likely moderate in many areas, sharp drops in house prices are unlikely anytime soon."

Though the outlook for housing markets is overall "favorable," demographic forces, such as the increasing senior populace, the young families, and the growing immigrant and second-generation Americans, will favor rental over for-sale housing. A combination of factors (e.g., unprecedented house price appreciation, land use restrictions) impacts building affordable housing while, according to the study, "From 2001 to 2004 alone, the number of households spending more than half their incomes on housing increased by 14 percent to 15.8 million."

The paradox of today's housing market is that while more people are building home equity than ever before, slow growth in wages for households in the bottom three-quarters of the income distribution is not keeping pace with escalating housing costs. Amidst a housing boom, it is now impossible to build housing at prices anywhere near what low-income households can afford without subsidies.

State and local governments allocate federal block grants with housing trust funds to help create affordable housing. However, for those earning $16,000 or less, the supply of affordable rental units shrunk by more than 13 percent, increasing "the shortfall in units available to these low-income households to 5.4 million."

Making significant headway will be difficult without the combined efforts of all levels of government to expand housing subsidies, create incentives for the private sector to build affordable housing, institute land use policies that reduce the barriers to development, and educate the public about the importance of affordable housing.

The State of the Nation's Housing 2006 (June 2006, pdf, 44 pages/5mB)