When Affordable Housing Isn't Affordable - The Tipping Point to Homelessness

Stable Housing: A Poverty Alleviation Strategy

By: Karen Wawrzaszek

According to Maslow's hierarchy of needs[i], for a person to reach their full potential, their most fundamental needs must first be met. It is at these highest levels, when we are not worrying about our basic needs of food, water, sleep, clothing, and shelter, that we are free to focus on activities that increase our personal enrichment and wealth. However, for many people the most basic need of affordable shelter remains out of reach, as shortages in affordable housing exist in every state in our country[ii].

It’s a problem that has been growing since the 1930s - when programs under the New Deal stepped in to help people obtain affordable mortgages during and after the Great Depression.  So how is it possible after 80 years since the New Deal, are we still battling issues in affordability in a country of great wealth and opportunity? Affordable housing is a complex problem that is not easily understood and one that is impacted by many different forces such as individual prosperity, and fluctuations in value that undermine housing stability and that ultimately lead to displacement. In fact, when housing prices force families to spend more that 32% of their household income on housing related costs, those communities begin to experience a rapid increase in homelessness.[iii]


Housing Policy Complexity

Housing prices in our country are shaped by federal policy decisions, the economy, the cost of building, land costs, the federal tax code, and multiple levers at the state and regional levels (such as tax credits, housing trust funds, planning and zoning, and comprehensive economic development plans).  U.S. housing policy is so complicated that many of the actors working in it often do not understand the full scope of the different forces that shape it, much less agree about how housing affordability issues should be resolved.  This lack of progress leads to a federal finger pointing at municipality and vice versa.

If the people working in housing policy have trouble understanding it, how can we expect those in need to make sense of it and push for better housing policies? The reality is that they cannot.  

Bandwidth tax[iv] tells us that satisfying our most urgent needs will get our focus and attention first.  In turn, the heightened focus on mere survival compromises the ability to focus on endeavors that might best serve our long term goals. The sad reality is that those who need solutions the most are the ones spread too thin from merely trying to make ends meet.  The upcoming city council meeting is the furthest thing from their mind.  


Household Prosperity

The current measure of affordability is housing that cost no more than 30% of gross household income. When households spend more than 30% of their paycheck on housing, it puts them in a situation where they have less to cover food and other necessities such as childcare, healthcare, or saving for unexpected expenses.

Although we tend to think of affordability as a concern for the lowest income households (certainly the stakeholders we are working on behalf of through Pomona Society), housing prices in Washington D.C. have escalated to the point where even those earning moderate incomes struggle to find housing that meets their most basic needs.  For example, the current median sale price for a single-family home is $548,100[iii]and the average rent for a two-bedroom is $2,675 per monthv.  In this example, to cover the cost of rent requires an hourly wage over $46 an hour, or more than three full-time minimum wage workers! 

As you can see in the chart below, the annual incomes of essential workers in our area do not line up with the income needed to afford housing.  


    Image via research tools at www.nhc.org

Workers earning a minimum wage can expect an income of $32,200 per year at 40 hours a week, typically with no paid vacation.  That equates to $2,600 per month to cover the necessary expenses of food, healthcare, transportation, clothing, utilities, childcare, and housing. 


Housing Market Fluctuation

Adding further insult to injury is the fluctuation in the housing market that exacerbates poverty for renters in poor communities. Among the many forms of variation in the market, the cost of land, and the impacts of dislocation pack the biggest punch in terms of skyrocketing rents and property values.  

First, land is not cheap.  Developers create the desirable real estate that will generate profit from the purchase of the land, and available land is squeezed with each new acquisition.  This causes property values to rise and thus the cycle continues, leaving fewer affordable options for those in lower income brackets.  

The other major force creating rising land values comes in the form of “gentrification”.   Unless you have been living under a rock, you have likely heard the term, and associate it with the hip urbanization of some of our older or declining neighborhoods.  However, in his book, “How to Kill a City,” Peter Moskowitz tells us there is more to the story about what gentrification means for our cities.  

In essence, gentrification tells a complicated story about the relationship between corporations, tax breaks, and affordable housing.  According to Moskowitz, gentrification is the result of a cultivation of outside capital to spur economic development (or, profits for those developers) at the expense of the existing population which is generally more economically depressed[iv]

Moskowitz points to local policies that deregulate and privatize services such as housing, education, and transportation as the tipping point for gentrification.  At the onset of these changes, lending begins to flow to the investors and developers that move into what were once disinvested areas – but the distinction here is that to whom the lending is awarded.  It flows to the outsiders that are coming to “fix up” the neighborhood, not to the people who were living there when it was in a state of disrepair. 

The new movement and new lending create a rise in property values, which should be a good thing, but it really only benefits the people who own property.  As property owners see the gap widen between property value and current rent, rents go up, and people become displaced.  


Community Displacement

A common resolution offered up when affordability is discussed is for people to simply move to more affordable areas.  But it’s not that simple.  Number one, residents of long-standing working-class neighborhoods often make ends meet through a tightly knit web of social capital that can be summoned to bridge gaps in times of need[v].  It is not uncommon for neighbors in lower-income neighborhoods to pool resources such as cars or babysitting duties. When these families and friends get split up, the arrangements that make life easier for low-income families can collapse.  

And two, place matters. Professor Raj Chetty, a leader in economic mobility research, shows us that living in impoverished areas lessens overall economic mobility (increased earnings potential) for the low-income population[vi].  This is due to the segregation of people and places, relegating those at the lower ranks of the income ladder to fewer economic opportunities, lower quality schools, and increased violence. While those in more advantaged neighborhoods have access to better schools, robust networks, and overall better economic opportunity.   


We cannot attempt to unwind poverty without providing all people access to community assets.  When we displace whole groups of people simply based on the ability to afford a basic need of shelter, we also make access to quality education, job centers, transportation, healthy food, and healthcare a function of zip code.  To do this, denies people the ability to move up the ladder of need fulfillment and keeps them from a fully realized life. 

The lack of stable and affordable housing is keeping an economically functioning life out of reach for many people in our nation.  However, the reality is that the people who need the solutions the most are the ones who are least participatory in its outcomes, for a variety of reasons such as complexity, market volatility, and access.  How do we solve that in a system that depends on citizens to bring forth grievances?  

We need to mobilize our local thought leaders, we need the buy-in of our officials and institutions to demand solutions that work, and we need education about these policies in our communities. Affordable housing solutions do not only belong on the shelves of academia or in the halls of our government, they belong to the people of the neighborhoods most impacted by those decisions.  

Stay tuned for our next post that will discuss new solutions that could encourage stability for our vulnerable communities. 


[i]Maslow's Hierarchy of Needs https://www.simplypsychology.org/maslow.html

[ii]The Gap: A Shortage of Affordable Rental Homes https://reports.nlihc.org/gap



vWashington Home Prices & Values https://www.zillow.com/washington-dc/home-values/

viiMoskowitz, Peter. 2017. How to Kill a City.New York, New York: Nation Books/Perseus/Hachette

viiiGreenbaum, Susan. 2008. “Poverty and the Willful Destruction of Social Capital: Displacement and Dispossession in African American Communities.” Rethinking Marxism, 10, 1 (January): 42-54. https://www.researchgate.net/publication/248939256_Poverty_and_the_Willful_Destruction_of_Social_Capital_Displacement_and_Dispossession_in_African_American_Communities

vivRace Segregation Down, Income Segregation Up https://www.brookings.edu/blog/social-mobility-memos/2013/12/05/rich-neighborhood-poor-neighborhood-how-segregation-threatens-social-mobility/

Karen Wawrzaszek