Appendix A: The Housing Crisis

During the 1980s, home foreclosures soared and homeownership rates declined. Record numbers of households that went too far into debt to buy the “American Dream” lost their homes in a decade when we produced more millionaires than at any time in history. The price of both homeownership and renting increased faster than personal incomes and inflation. This caused many renter households, that had to commit a larger share of their incomes to rent, to forego buying a home. And homelessness increased dramatically, as renters struggled to keep a roof over their heads. Today, millions of Americans live in overcrowded apartments, and millions more pay more than they can reasonably afford for substandard housing.

For low-income renters and young families, it has became harder than at any time since the Great Depression to buy a home or pay the rent. For the poor in inner cities, trying to find decent affordable housing has become a disaster. The following factors have been major contributors to this problem.

Increasing Poverty, Declining Wages

While poverty among the elderly declined during the past three decades (thanks to federal social policies), poverty among the overall population has increased.

In 1981, the poverty rate was 11.6 percent. By 1993, that rate had risen to 15.1 percent. While the rate declined slightly to 14.5 percent in 1994, this still means that more than 38.1 million people in America were living below the official poverty line. For people under 18, the poverty rate was 21.8 percent in 1994, after peaking in 1993 at 22.7 percent-the most poor people since 1964. In 1994, children made up close to 40 percent of those living in poverty. (U.S. Census Bureau 1994)

Moreover, many observers argue that poverty is actually much worse than official figures show. According to Patricia Ruggles of the Urban Institute, the government’s official poverty line ($15,141 for a family of four, as of 1994) is based on out-of-date standards (originally calculated in the early 1960s) and “does not reflect a realistic minimum level of living.” Using Ruggles’ updated standards, the poverty rate would climb to over 23 percent, and more than 50 million Americans-and one of every three children-would be considered poor.

Poverty has also become more concentrated in inner cities. From 1970 to 1990, the number of census tracts with 20 percent or more poverty in the 100 largest cities increased from 3,430 to 5,596.[29] (U.S. Census Bureau 1990)

An important reason for the increased poverty figure is the erosion of real incomes (i.e., wages measured against inflation) since the 1970s. Due to the depletion of solid blue-collar jobs and the declining job base in the inner cities, many people have taken on lower-paying, part-time, or temporary jobs in services. The transformation to a post-industrial economy and the erosion of public benefits has driven down wages and incomes and increased the number of working poor. In 1994, 40.8 percent of poor persons age 16 years and older worked, and 10.5 percent of them worked throughout the year. (U.S. Census Bureau 1994)

In addition, the minimum wage, prior to increasing from $4.25 to $4.75 an hour in October 1996, had lost more than 25 percent of its purchasing power due to inflation since 1978. Though raises in the minimum wage did increase its purchasing power between 1989 and 1992, inflation subsequently eroded those gains. (U.S. Dept. of Labor 1996)

The Rent Squeeze

As poverty has increased, rents have also risen.

The average rent including utilities rose from 23 percent of income in 1970 to 27.2 percent in 1980 to a high of 30.1 percent in 1991.[30] This problem is nationwide. In 1990, nearly one-fifth (17.8 percent) of all American renter households devoted more than half their income to housing costs.[31At least one-third of all renters in every state paid more than 30 percent of their incomes for housing.

The median monthly gross rents paid by poor households living in unsubsidized housing jumped from $258 in 1974 to $359 in 1991 (measured in 1989 dollars). For a family of three with a poverty-level income of $9,885, this latter figure would consume 43.5 percent of their income. (Harvard Joint Center for Housing Studies 1993) A majority of poor renters are forced to devote at least half of their income to housing, forcing them to choose between shelter and food. (Lazere 1995)

According to the 1993 American Housing Survey, more than half of all renters below the poverty level spent over 50 percent of their incomes on housing costs. Nearly three-quarters spent more than 30 percent of their income on rent and utilities. The recent HUD report, Rental Assistance at a Crossroads, found that 5.3 million households (nearly 13 million people) received no federal rental assistance and either paid more than 50 percent of their income for housing, lived in severely substandard housing, or both. (Low Income Housing Information Service 1996)

From 1970 to 1994, the average income of renters dropped from 64.9 percent of that of homeowners to 48.5 percent. During those years, the average rent burden (percent of income) increased from 23 percent to a high of 31.2 percent in 1992 and 1993. It dropped slightly to 30.5 percent in 1994, due to a 2 percent increase in median renter income, but was still the third highest burden in over two decades. The biggest jump occurred during the 1980s, as real incomes fell and rents rose. (Harvard Joint Center for Housing Studies 1995)

John Atlas
John Atlas is a found of Shelterforce and board chair emeritus. He is the producer of ACORN and the Firestorm, a film directed by Reuben Atlas and Sam Pollard and author of SEEDS OF CHANGE: The Story of ACORN, America's Most Controversial Anti-Poverty Community Group. He is also the former executive director of the Passaic County Legal Aid Society.
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Ellen Shoshkes is an architect and planner based in Hoboken, New Jersey. Ellen is was formerly director of housing research in the Architecture and Building Sciences Group at New Jersey Institute of Technology. She co-authored Saving Affordable Housing for NHI.

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