Even as growth in home prices and rents continues to slow, the number of cost-burdened Americans and need for affordable homes increases, according to Harvard University’s 2023 State of the Nation’s Housing report, presented earlier this summer.
In a new paper by Daniel McCue, Senior Research Associate at the Joint Center for Housing Studies (JCHS) at Harvard University, he weighs in on said report, shedding light on a dire situation faced by the country’s lowest-income households, as well as possible government-level solutions.
According to McCue, the report reveals a deepening divide between the rich and poor. More optimistically, he notes that some federal policies put into place during the COVID-19 disaster prove that lawmakers can come up with effective housing solutions when they find a way to work together.
What the JCHS analysis showed:
The rise in mortgage interest rates, inflation, and growing concerns about affordability and the economy all contributed to the slowdown in home price appreciation and rent growth. Using S&P CoreLogic Case-Shiller Home Price Index data, Harvard showed home prices increased just 1% nationwide between March 2022 and March 2023, after increasing 21% in the previous year.
Even so, some 10 million households are paying more than half of their income on housing costs, leaving little for those families to cover other basic needs such as healthcare, education, and food.
"The findings are alarming and demand urgent attention from policymakers," stated Dr. Emily Roberts, Lead Researcher of the JCHS study. "The American dream of homeownership is slipping further away from the grasp of those who need it the most."
McCue adds that shortages in housing in most cities have contributed to keeping prices and rents relatively high. Plus, he points to a slowdown in single-family construction over the past year, which he calls “concerning.”
“New homes are targeted to higher-end households, which limits the ability of new construction to address housing shortages for moderate-income households,” McCue noted. “This is not a new phenomenon, but it is increasingly impactful given the high costs of development that have been raised further by higher interest rates and inflation.”
The annual report also highlighted the disparities faced by various demographic groups. Black and Hispanic households, in particular, are struggling to access affordable housing due to long-standing systemic barriers and discrimination in the housing market, McCue notes, referring to data in the full report.
What can be done at a policy level?
The findings of the JCHS report underscore the critical need to prioritize housing affordability in national and local policy agendas, housing advocates say.
“While putting faith in political action at the federal level is questionable, the report finds that pandemic-era housing initiatives helped keep many people in their homes, suggesting that we as a nation can take steps to address housing challenges in meaningful ways.”
The $46 billion Emergency Rental Assistance program and eviction protections brought evictions down to 10% of their average level in early 2020. The mortgage forbearance program helped 8.5 million homeowners avoid foreclosure, and over the past year there was no wave of foreclosures when thousands of households exited the program, as some had feared.
To this day, delinquencies remain below pre-pandemic levels with help from the Homeowner Assistance Fund which continues to help owners pay for monthly housing costs.
“The fact that the housing affordability crisis is increasingly a bipartisan concern provides some hope for political action, but the question remains of whether the two parties can agree on solutions.”
Housing advocates and experts are urging policymakers to tackle the issue with a multi-pronged approach, which includes zoning reform, property tax incentives for affordable housing developers, and increased investment in public housing infrastructure.
Concludes McCue, “Ultimately, it will require a multifaceted, public and private sector approach with investment, advancement, innovation, and collaboration across every aspect of housing production to provide enough housing to meet the needs of millions of low- and moderate-income households who continue to be burdened by high housing costs.”