2.1 Overview
Reasons Why Housing is Unaffordable
After paying for their housing costs, millions of people have insufficient monthly income left over to pay for food, transportation, health care, and other essential living expenses. They may also be one missed paycheck away from eviction or foreclosure. These are the impacts of being housing cost-burdened.
Watch this video to learn why housing is often unaffordable.
Why can’t many families find a home they can afford?
Let’s review the four main reasons housing is unaffordable. Click each of the boxes to view more information.
According to the National Low Income Housing Coalition’s Out of Reach 2021 report, on average, a full-time worker in 2021 needed to earn an hourly wage of $24.90 per hour to afford a modest two-bedroom rental home in the U.S.
Our country’s housing shortage is especially dire for the lowest-income renters — a category known as extremely low-income renters — who represent 70 percent of the severely cost-burdened households in the U.S. (National Low Income Housing Coalition 2021).
It’s not because they don’t want to; they can’t. The rents and home prices that many households can afford are too low to cover the costs of developing and operating newly constructed housing, commonly referred to as a funding gap due to high land and construction costs. Some households’ incomes are too low to cover even the costs of maintaining and insuring existing housing.
Without an adequate supply of new housing, the rents and home prices of existing housing units in economically thriving regions often rise. While many factors that limit housing supply are outside of government control, we know from experience that some government regulations, like restrictive zoning laws and drawn-out approval processes, can reduce the supply of housing by slowing the rate of new development.
Increases in a developer’s project costs are often passed on to the families that move into those properties, so it is important to assess regulations that impact those costs to determine whether they are unavoidable and if their benefits outweigh potential costs.
Federal, state, and local governments fund a range of programs to increase the supply of affordable housing. Still, these programs are not keeping pace with demand. For example, federal housing assistance over the past 15 years has been largely stagnant while the number of renters with very low incomes (i.e., less than 50 percent of AMI) is increasing.