We’re not having a real discussion about income inequality unless we’re talking about the serious gap between what people earn and how much of their income they must spend on rent.
As the nation’s population grows over the next 15 years, new renters will outnumber homeowners, with nearly six in 10 new households renting their homes, according to a forecast by the Urban Institute. At the same time, the number of renter households paying more than half their income on rent could rise as high as 14.8 million by 2025, up from 11.8 million this year, according to a recent forecast by Harvard’s Joint Center for Housing Studies and Enterprise Community Partners Inc., the affordable housing nonprofit where I serve on the board.
Few realize how many of our neighbors are on the brink of becoming homeless. Financially strapped families face daily challenges: Buy groceries or put gas in the car? Pay the electric bill or buy medicine? Families who can barely afford their rent face disaster if there’s an unexpected hit to their income. This is a major factor in the spike in homelessness in places including tent cities outside Honolulu and the streets of San Francisco.
Why is it getting harder to be a renter in America?
Tight standards for mortgage loans and high home prices have locked many would-be homebuyers out the market. At the same time, much new rental construction has been focused on luxury apartments. A scarce supply of affordable rental options has resulted in historically low vacancy rates and skyrocketing rents. Meanwhile, wages for most low- and middle-income households are stagnant.
With these trends in mind, it’s time to reorient our housing policy to reflect our shared future.
Currently, we direct billions in subsidies to high-income homeowners. Those who are financially comfortable are still able to deduct mortgage interest and property taxes from their income on their taxes. They also can avoid paying taxes on much of the profit when they sell their home.
All of these tax breaks for homeowners add up to big money: about $142 billion last year, or 72% of what the U.S. government spends on housing. By contrast, rental subsidies worked out to about $55 billion last year, including about about $29 billion in direct rental assistance—most of which helps elderly and disabled households—and about $8.1 billion on tax credits to build homes affordable to working families.
Other short-sighted actions on Capitol Hill include cuts to key funding sources like the HOME program, which makes affordable housing developments possible in communities around the country, and a lack of movement to expand the low-income housing tax credits that are critical to a healthy supply of affordable homes.
If we are to overcome our rental housing shortage, policymakers must redirect public subsidies. They also should pursue innovative strategies such as insisting that federal transportation money and housing near public transit are inseparable.
Local elected officials must ensure that rental homes can actually be built by removing barriers to new construction and embracing density. Together, developers and policymakers must find ways to reduce costs, improve residential zoning requirements and make land available to meet growing needs.
Businesses, policymakers and nonprofits must work together to show the way forward. The new Make Room campaign, which launched in May with the sponsorship of Enterprise and the MacArthur and Ford Foundations, is working to put the needs of renters on the national agenda.
A stable, affordable home is the foundation of opportunity and a fair shot at success in life. It’s high time that renters have a voice in Washington. We should not idly watch as our nation’s economic growth and future prosperity are jeopardized by unaffordable rent.
Shekar Narasimhan is managing partner at Beekman Advisors, a housing industry advisory firm in McLean, Va.