The rule of thumb for housing, financial experts will tell you, is that you aren’t supposed to pay more than 25 percent of your income in monthly rent or mortgage payments. I know a few people for whom that’s true, but only a few. You’re considered to be “cost-burdened” if you pay more than 30 percent of your income in rent and utilities, and a new study from Harvard’s Joint Center for Housing Studies found that in 2022—the most recent year for which data is available—the cost-burdened constituted half of all renters nationwide. Half of all renters couldn’t afford what they paid in rent.
Like a lot of economic problems, the Covid-induced rent spike worsened through 2021, the first year of Joe Biden’s presidency; started easing in 2022; and continued to ease through 2023. Today, the Harvard report says, “rent growth has almost completely stopped.” According to the report, that’s attributable at least in part to an increase in supply due to new construction that predated the Federal Reserve’s interest rate hikes, which began in March 2022. The Biden administration didn’t create the rent spike, nor did it do much to end it. But the spike does appear to be over.
The affordability problem remains. It’s a “decades-long” problem, the Harvard report says, attributable to rent increases outpacing income gains. Between 2001 and 2020 median rents grew 21 percent, after inflation, while renters’ incomes grew 2 percent. The problem may be manageable for families earning $75,000 or more, where growth in renter households was fastest over the past decade and a half. But it’s catastrophic for families earning $45,000 or less, where growth in renter households during that period was either slight or nonexistent. That drove homelessness to the record level of 653,100 people, of whom 256,610 people were unsheltered—which is also a record. Between 2015 and 2023 the number of unsheltered homeless increased by 48 percent. If it seems to you that there are a lot more homeless people living in the street, that’s because there are.
The solution favored by liberal policymakers these days to increase housing affordability is to increase urban density. Build, baby, build! There are places where I can see that working, but I have my doubts that it will achieve much in cities with sky-high housing demand. Living in the District of Columbia has made me cynical about this approach. Since 2000, the city has been on a building binge, increasing the number of housing units by nearly one-third, from 274,845 to 360,890. Yet median monthly rent during that period increased faster—it more than doubled—rising from $618 ($1,123 in current dollars) to $2,485. Since 2014, according to a September report by the nonprofit United Planning Organization, or UPO, the proportion of D.C. households earning $50,000 or less that pay more than half their earnings in rent has risen from 50 percent to 65 percent.
Why did D.C.’s rapid increase in housing supply not reduce rents? I suspect that building apartment houses in cities where demand is extremely high, as it is in D.C., is a little bit like building a highway to ease traffic in an automobile-clogged city. Rather than bring supply in line with demand, it just increases demand. That problem is aggravated by city governments’ unwillingness to set aside much new construction for moderate- and low-income renters. According to the UPO report, in 2022 the District spent just 19 percent of the money in its main program to build affordable housing on housing for families earning less than about $45,000. By law, the District is supposed to spend half this trust fund to build housing for this demographic. Over the past eight years it’s spent less than a quarter.
Rather than rely on market forces to create affordable housing (Build, baby, build!), I think government will have to intervene more directly. In his 2023 book Poverty, by America, the Princeton sociologist Matthew Desmond observes, cuttingly, that “liberals have a despondency problem: fluent in the language of grievance and bumbling in the language of repair.” I flinched as I read that, because, of course, it’s true. (For my review of Desmond’s book in The Washington Post, click here.)
One solution Desmond proposes is continuation of the federal Emergency Rental Assistance program created during Covid, which furnished $46.5 billion in rental assistance. The program kept eviction filings low “months after the eviction moratorium ended,” Desmond writes, “even as rent and inflation rose.” The Supreme Court ended the federal moratorium in August 2021; four months later, Desmond reports, evictions were “down 39 percent in Minneapolis, 53 percent in Albuquerque, and 64 percent in Austin.” Desmond calls this “astonishing,” but the program was winding down as he wrote.
With low-income housing, the market strikes me less as the solution than as the problem. Desmond demonstrated this in a 2019 study co-authored with Nathan Wilmers of MIT’s Sloan School of Management. Working from census data, Desmond and Wilmers found that the profit landlords earned renting out in poor neighborhoods was twice what they earned, per apartment, from renting out in rich neighborhoods, even after accounting for higher maintenance costs (“busted furnaces, cracked windows,” etc.), nonpayment of rent, and vacancies. An apartment in a poor neighborhood generated about $100 per month; an apartment in an affluent neighborhood generated $50.
This is wildly counterintuitive. Shouldn’t it be easier to extract profit from the rich than the poor? Only, it turns out, in the most expensive housing markets, such as New York City, where the market will bear luxury pricing off the charts. Otherwise, no, it isn’t. The reason is that the cost of land (and therefore mortgages and tax bills) is much, much lower in poor neighborhoods, whereas the rents are only somewhat lower. In Indianapolis, for instance, median monthly rent was $991 for the entire metropolitan area, yet a still-robust $816 for neighborhoods where poverty exceeded 40 percent.
This would not be the case if Section 8 housing vouchers were more readily available, because under Section 8, landlords are barred from charging tenants more than 30 percent of their monthly adjusted income. But eligibility requirements are severe (most of the people profiled in Desmond’s 2016 book Evicted were ineligible), and among the few who meet them only about 25 percent ever actually receive assistance because those funds are scarce.
The low-income housing problem, one hopes, has eased somewhat since 2022 as workers at the low end of the income distribution have made significant gains. But data from Desmond’s Eviction Lab at Princeton shows that through 2023 evictions never fell below 86 percent of their pre-pandemic level, and on occasion they matched or exceeded it. It’s worth remembering that Barbara Ehrenreich’s classic first-person account of trying to survive on the minimum wage, Nickel and Dimed, was researched and written in the late 1990s, at the peak of the dot-com boom, when the labor market was even tighter than it is today. In the lives of the poor, the market can achieve only so much.