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Author’s note: This report is not associated with Right to the City’s Homes for All campaign. The opinions and analyses contained in the report are those of the author and the Center for American Progress. 

Housing affordability in the rental market is an essential determinant of whether a family is able to achieve economic stability. At the same time, the availability of affordable rental units is critical for the development, retention, and expansion of a local workforce and for economic competitiveness. Yet, rental housing is a pressing public issue for families at all income levels, particularly for those in the extremely low- to moderate-income brackets. Rental markets across the nation have become tighter, and as rent continues to outpace incomes, a substantial portion of renters are finding it increasingly difficult to meet nonshelter-related expenses and to build their savings. Forty-four percent of the nearly 30 million renters in the United States—excluding high-income households—have unaffordable rents; In other words, they spend more than 30 percent of their income on housing costs. Significant gaps in the supply of rental units that are affordable for households in different income brackets are largely due to the inadequate production of homes, particularly in the lower-income spectrum of the housing market. As the supply of low-rent units has decreased, additions to the rental housing stock have shifted to the high end—more specifically, to the very high end. High-end developments do not encourage enough supply to ensure that affordable housing trickles down to low- and moderate-income renters.

The private housing market and the government’s decadeslong experiment with a laissez-faire approach to supply have not worked well to fill the affordable housing gap. The federal government provides more than $120 billion annually in tax benefits for homeownership, particularly benefiting the wealthy.¹ At the same time, despite the continuing effort of programs such as the Low-Income Housing Tax Credit (LIHTC), it does not adequately address the increasing gaps in affordable rental housing. The federal government cannot afford to downplay the importance of rental housing for its citizens and the economy. It is time for the federal government to contribute more aggressively to the U.S. supply of affordable rental housing, as it did in the past. However, re-evaluating historical practices in the direct government provision of affordable housing and learning from past mistakes are necessary first steps toward tailoring a viable, equitable, and sustainable response to the rental housing crisis.

This report recommends a Homes for All program, by which the federal government will engage in the large-scale construction of affordable and good-quality homes while avoiding the mistakes made in the past several decades in the construction and management of public housing. Homes for All emphasizes an active role in the production of affordable units for renters who are in need of affordable housing, under the assumption that supporting this type of housing will meet three goals: challenge private-market development practices that greatly influence home prices; encourage long-term affordability; and promote a process by which housing costs will better match household incomes, especially in proximity to employment centers and areas experiencing rapid job growth.

After a discussion of the current shortage of affordable rental housing and a brief account of past federal government practices in the direct provision of affordable rental units, this report outlines the Homes for All program, which features the following elements:

• Construction: The federal government will direct capital grants to the construction and management of new government-funded housing.
• Design: Unlike past government-produced housing, Homes for All will feature the following attributes:
  • Homes will be available to a mix of incomes, while preserving the ability to target assistance to those with the greatest need, and the socioeconomic status of residents will be impossible to distinguish by the exterior appearance of buildings through uniform design standards.
  • In large metropolitan areas experiencing rapid job growth and featuring a large transit and/or rail system, units will be part of transit-oriented developments (TODs).
  • Mixed-use development and commercial uses on ground floors will be encouraged to serve residents and neighbors; to stimulate job and small-business creation; and to provide an added income stream.
  • Building heights will be consistent with surrounding built areas, and units will be scattered throughout the region.
  • A variety of units will be produced to accommodate several types of households, although single people are the most common type of renter household.
  • Structures and units will feature universal design principles in order to promote access for and use by all people regardless of their age, family size, or ability.
  • Units will be equipped with broadband internet access.
  • Construction techniques will promote energy efficiency and recycling. Construction will also explore novel building techniques and quality construction materials, such as modular construction.
• Land acquisition: Under the Homes for All program, the federal government will produce housing units on publicly owned land, where possible, and otherwise on acquired sites that will be converted into community land trusts (CLTs).
• Management: Upon completion, the housing stock created under the Homes for All plan will be managed and operated by local nonprofit, mission-driven organizations and CLTs.
• Eligibility: The Homes for All program will not be means-tested and will be aimed at a broad spectrum of individuals and families who are in need of affordable housing. Homes for All will offer a variety of housing types to people based on what they need. A point system based on need will be established locally for the allocation and transfer of units to families and individuals. Priority in unit allocation will be determined based on a variety of factors which include, but are not limited to, the following: current housing cost burden; distance to jobs and educational opportunities; accessibility; overcrowding; and presence of young children and older adults.
• Long-term affordability and security of tenure: Publicly financed housing will be permanently held in some form of social ownership, such as CLTs.

This report proposes the production of 1 million homes over the next five years through the Homes for All program. The construction program will require a minimum of $20 billion in funding annually over the next five years. This would be a worthy capital investment in the lasting economic stability of American families.

The rental market presents a critical challenge for a vast proportion of Americans. More than 36 percent of Americans are renters,² and housing affordability in the rental market is a major determinant of whether a family is able to achieve economic stability. It is essential for enabling families to save for their children’s education, purchasing a home, and retirement. Access to adequate affordable rental opportunities can also determine whether a family will be able to move to a new place in search of good job opportunities.

In the years following the Great Recession, rental markets across the nation have become tighter due to the drop in homeownership; the increase in rental demand; and inadequate production of homes, particularly in the lower-income spectrum of the housing market. Since 2010, the number of renter households has increased by nearly 1 million a year and a large part of the growth in rental demand has been driven by the increase in high-income renters.³ At the end of 2017, 43.1 million households rented their homes; this number is projected to increase by nearly 500,000 annually over the next decade. (see Figure 1)⁴ Reflecting the increased demand for rental units, the national rental vacancy rate has decreased from 10.7 percent in the fourth quarter of 2009 to 6.9 percent in the fourth quarter of 2017. Vacancy rates vary geographically. The New York City Housing and Vacancy Survey, for example, reports that in 2017, the citywide vacancy rate was 3.63 percent.⁵

Since 2000, rent of primary residences has increased, on average, by 15 percent in real terms, while the median income of renter households has decreased by 2 percent.⁶ As rent continues to outpace incomes,⁷ families across all income brackets are finding it increasingly difficult to meet nonshelter-related expenses and to build their savings. This problem is becoming more common among middle-income renters but it is particularly critical for those low-income households spending more than half of their income on housing. These households cannot meet other basic necessities—such as food, transportation, and medical costs—after paying for housing.⁸ Every year, millions of people are evicted—in many cases, because they cannot afford their rent.⁹ The National Low Income Housing Coalition indicates that across the nation, it is impossible for a person working full time at the federal minimum wage to afford a two-bedroom rental unit at the fair market rent.¹⁰ Furthermore, people of color are disproportionately represented among renter households, and 1 in 5 renters is foreign-born.¹¹ Lack of sufficient affordable housing, combined with other barriers such as housing market discrimination, reduces the range of residential options for these groups.

Table 1 shows the significant gaps in the supply of rental units that are affordable for households in different income brackets, even after subtracting units that are for rent.¹² (see Methodology) Excluding high-income households, 44 percent of nearly 30 million renters have unaffordable rents—in other words, they spend more than 30 percent of their income on housing costs. Nearly 8 million renter households—19 percent of all U.S. renters—live on extremely low incomes, or an income level defined by the U.S. Department of Housing and Urban Development (HUD) as at or below 30 percent of the family area median income (AMI).

Furthermore, only about 4 million units in the United States—including those that are available for rent—rent at a price that is affordable to the extremely low-income bracket. (see Table 1) And only about 2 million extremely low-income renter households occupy units that are affordable to them. The remaining 1.9 million units renting at extremely low rates are occupied by higher-income households. About 6 million extremely low-income renter households—76 percent of all extremely low-income renters in the United States—occupy units that cost more than 30 percent of their income. Similarly, two-thirds of very low-income renter households, another HUD-defined income bracket, occupy units that are unaffordable to them, partly because a large number of the available units that would be affordable are occupied by households with higher incomes. (see Methodology for definitions of income brackets)

The affordability problem for renters is particularly severe in large metropolitan areas across the nation. As Figure 1 indicates, large clusters of cost-burdened families are located in the Northeast, in the Midwest, along the Pacific Coast, and in the South Atlantic regions. In states such as California, New York, and Florida, nearly one-third of all renters are severely burdened, spending more than half of their income on housing costs. The availability of affordable housing is critical for the development, retention, and expansion of a local workforce and for economic competitiveness,¹³ and the cost of housing represents an important barrier to geographic labor mobility.¹⁴ Across America, the shortage of affordable housing blocks families looking to move in search of good jobs. This affects not only those families but also struggling communities and the workers who wish to remain in them, as those localities may be able to adjust more easily if their labor supplies were not out of line with market needs.

Unfortunately, federal rental assistance programs continue to fall short of meeting the increasing need for affordable rental units among low-income households. Despite a growing demand for housing assistance, the deep cuts in funding that Congress has made to HUD programs in recent years have intensified the shortage of subsidized housing resources.¹⁵

HUD’s most recent report on the United States’ worst housing needs¹⁶ indicates that the gap in rental assistance relative to need is widening. Federal rental assistance programs currently serve about 4.5 million low- to moderate-income households, and they have not kept pace with the growing need.¹⁷ Only a small fraction of the 44 million households who rent their homes receive some form of rental assistance. (see Table 2) From 2001 to 2015, the share of renter households eligible for federal housing assistance and receiving rental subsidies decreased from 28 percent to 25 percent.¹⁸ Center for American Progress analysis indicates that a large proportion of extremely low- and very low-income renter households—60 percent and 86 percent, respectively—do not receive any rental assistance in the form of housing vouchers, public housing, or project-based Section 8 subsidies. Housing authorities across the nation have extremely long waiting lists of families seeking housing assistance.¹⁹

Currently, the LIHTC program, which was established by the Tax Reform Act of 1986, represents the largest federal subsidy addressing the limited supply of affordable rental units for low-income families. Since its inception, the program has financed the development and preservation of 3.05 million housing units.²⁰ The LIHTC program alone, however, is not filling the affordable housing gap. And market forces have proven insufficient to meet the need for affordable housing—not only among those in the lowest brackets of the income distribution but for the middle brackets as well. Much of the expansion of the rental stock over the past 10 years can be attributed to the conversion of formerly owner-occupied single-family homes—largely a response to the foreclosure crisis—and the recent boom in multifamily construction.

The Joint Center for Housing Studies of Harvard University indicates that as losses in the supply of low-rent units have continued, additions to the rental housing stock have shifted to the high end—more specifically, to the very high end.²¹ In 2016, 40 percent of newly constructed rental units targeted higher-income households, compared with 15 percent of newly built units in 2001.²² The New York City Housing and Vacancy Survey, for example, indicates that the number of units renting for more than $2,000 per month increased by nearly 100,000 units from 2014 through 2017, whereas the number of units renting for less than $1,500 per month dropped by more than 165,000 during that same time frame.²³ As research on filtering indicates,²⁴ the construction of luxury rental units does not spur a filtering down process that is sufficient and fast enough to move the housing stock from higher- to lower-income households. This is particularly true in tight, high-cost markets such as San Francisco.²⁵

In summary, rental markets across the nation have become tighter and continue to display significant gaps in the supply of rental units that are affordable for households in different income brackets, particularly among those at the bottom of the income distribution.

During the Great Depression, Modern Housing, a book by public housing advocate Catherine Bauer, became the manifesto of a movement that called for the federal government’s direct involvement in the large-scale development of good-quality, affordable, and decentralized housing available to all American workers.²⁶ Inspired in part by government-supported residential programs that were being developed at that time in Western Europe, the book called for innovative architectural design and low-interest capital that would cut costs and promote a more efficient production of housing, along with amenities and vibrant neighborhoods that everyone could enjoy.

Bauer and her fellow housing and labor activists had an important influence on early direct federal housing activity in the New Deal era, when the Great Depression created momentum for programs that focused on the production of housing for middle- and lower-income Americans. Indeed, the New Deal established a few homebuilding programs, none of which were officially referred to as public housing. As part of these programs, the federal government bought land and built dwellings, predominantly outside cities.²⁷ Forty of the 99 communities built during the New Deal were rural or suburban.²⁸

New Deal housing initiatives often assisted labor unions in the development of low-rent housing for American workers.²⁹ The establishment of the Public Works Administration (PWA) Housing Division programs—created by Title II of the National Industry Recovery Act of 1933—sponsored slum clearance and housing construction as a job-creating measure. From 1934 through 1937, the PWA Housing Division produced 51 public housing projects that contained 21,800 units in total.³⁰ Design standards were very high, and PWA housing was typically greeted by public approval. The Carl Mackley Houses in Philadelphia, which were completed for the American Federation of Hosiery Workers, are a well-known example of such endeavors. Like other developments completed under the PWA, this complex featured generous amenities such as apartments with porches, a pool, playgrounds, an auditorium, underground garages, a nursery school, rooftop laundries, and rooms for tenant activities.³¹ Other well-known examples are the Harlem River Houses in New York City and Lakeview Terrace in Cleveland.

Public housing differed from private-market stock in its financing, development, and occupancy. Public housing entailed government ownership and was not means-tested.³² At first, PWA housing was available to anyone who desired to apply. (see Table 3) As historian Gail Radford argues, “programs limited to only the poorest have debilitating long-range problems. Their narrow constituency makes them more susceptible to budget cuts, and participants are often stigmatized.”³³ With the George-Healey Act of 1936, however, income ceilings for PWA housing were established, and housing directly built and owned by the government became a residential option only for families of modest means.³⁴

From the beginning, the PWA was regarded as a temporary agency. PWA housing, therefore, was not immediately perceived as a substantial threat to the private housing market.³⁵ Resistance to public housing intensified when proposals emerged for a permanent public housing program.³⁶ That permanent program was established when the Housing Act of 1937—also known as the Wagner-Steagall Act—authorized local public housing authorities (PHAs) to issue bonds to cover the costs of constructing public housing units.³⁷ The program operated on a much larger basis than the PWA Housing Division, and decisions as to whether and where to build and locate public housing were left to individual localities, many of which never participated in the program.

Often, city councils would take control of the siting process, and public housing units would be spatially isolated from the mainstream market, particularly in neighborhoods with large concentrations of low-income people of color.³⁸ Unlike PWA housing, the public housing program established under the Housing Act of 1937 was carried out by keeping construction costs minimal and by making units available only to the lowest-income groups. Cuts in public housing construction costs were detrimental to the quality and safety of units and buildings: Often, closets did not have doors, kitchens were not separate from other living quarters, and high-rise developments featured skip-stop elevators.³⁹ In addition, the law’s equivalent elimination provision ensured that the public housing program would not constitute a significant threat to the private housing market. Public housing construction was linked to slum clearance and the replacement of substandard units, because slum buildings were razed and replaced with public housing buildings in the same areas. This clause had profound implications in terms of residential segregation: Public housing tended to be built where slums had been previously located and where people of color were concentrated due to the absence of any other residential options because of racial discrimination.⁴⁰

After being temporarily derailed by World War II, the public housing program was reauthorized by the Housing Act of 1949. Subsequently, the public housing program was largely used to support the urban renewal program.⁴¹ Public housing, as it was redesigned and repurposed in the postwar era, has been hotly debated, despite some lasting successes, which include those of many small housing authorities.⁴² Many factors have led to the stigmatization and perceived deficiencies of government-built housing, including mismanagement; the means-tested and racialized nature of the program; poor design; limits on capital and operating costs; the placement of units and tenant allocation practices; and local discretion over siting.^{https://www.americanprogress.org/issues/economy/reports/2018/07/24/452645/homes-for-all/}