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University of Wisconsin–Madison

Two Key Facts (and Myths) of American Housing Policy

As students begin a new year, many across campus are reading Evicted: Poverty and Profit in the American City in their classes or for discussions groups.  The stories in the book of lower-income families and landlords in Milwaukee are powerful and compelling. Author Matt Desmond provides readers a deep understanding of the complex factors at play in the housing market for poor households.  The story in Milwaukee is the story of many of our major cities and the book provides key insights into U.S. housing policy.

Since it is the beginning of a new semester, I think it’s time for a short quiz.  Don’t worry, there won’t be any grades attached!   I use these same “trick” questions at the beginning of my housing policy course here at UW. They’re really not “trick” questions, but rather to help people think about their own assumptions.  Don’t worry if you don’t know the answers; I would bet that many media personalities and political leaders also don’t know these facts.

Think of your own answers before you read the rest of this post. Or quiz your friends or family members.  The purpose of the Go Big Read book is to foster lots of discussions.

Ok, here goes the quiz.

Question 1: “What percent of low-income renter households in the United States live in privately owned rental housing (in other words not in public housing)?”

Question 2: “What percent of low-income renter households in the United States receive any form of housing assistance or housing payment from the government to help them pay the rent or which reduces the rent they otherwise would pay?”

The answers to these two questions provide us with two of the most important facts for understanding American housing policy, and expose common myths. They also illustrate why the book Evicted is so powerful and so important.

And the answers …

For Question 1, the answer is that the overwhelming vast majority of poor and low-income renter households acquire their housing through the private market. About 93 percent.  Only 7 percent of low-income renter households live in public housing. That’s why Matt Desmond’s book Evicted is so important because his is one of the first significant treatments of the private rental housing market that dominates the housing delivery sector.

As Desmond himself writes, many housing researchers have not focused on the private housing market.  In his final chapter, “About this Project,” he writes, “And yet here was the private rental market, where the vast majority of poor people lived, playing such an imposing and vital role in the lives of the families I knew in Milwaukee… And we hardly knew a thing about it.” (Evicted, p. 329).

Using the most recent data available from HUD[1], I estimate that there are about 17.5 million low-income[2] renter households in the United States.   Currently, there are only about 1.2 million households living in public housing units.  This means that about 93 percent of low-income renter households acquire their housing through the private rental market, which includes both those private rental markets that receive any form of subsidy or rental assistance payment and those which do not receive any form of subsidy or rental assistance payment.

The fact that public housing (called “social housing” in European countries) is such a small percentage of the rental housing stock is one of the fundamental differences between the American housing system and that of many other developed (OECD) countries.[3]  There are many historical and policy reasons why the American housing system developed a stronger reliance on private market housing than European countries. If you are interested in reading more on the history of public housing or American housing policy in comparative perspective, you can try this book, or this book,  or this book (focuses on New York), or this book (focuses on Chicago), or this excellent book by our friend in neighboring Minnesota.  This kind of proves Desmond’s point: I can quickly think of 5 great books on the history and politics of public housing, but only Desmond’s book really delves into private market housing.  (You can also read a very brief history of public housing on p. 301-302 of the book).

Public housing plays a smal role in Evicted.  It shows up, for example, in Larraine’s search for housing after being evicted from her trailer home. She doesn’t think she has much of a chance of securing public housing so she has never even applied before.  (Most public housing units have very long waiting lists, many public housing authorities have closed applications.) Besides, “for years Larraine had assumed that most public housing was exclusively for senior citizens.” (p. 223). Larraine, in fact, did apply and was rejected for Public Housing because of her eviction history: “…Housing Authorities count evictions and unpaid debts as strikes when reviewing applications.” (p. 297).

For Question 2, the answer may be just as surprising: the vast majority of low-income renter households in the United States do not receive any housing subsidies or assistance at all.  The specific answer is that only 33 percent of income-eligible low-income households receive any form of housing subsidy or rental assistance. (Evicted, p.302-3; see also Matt Desmond’s policy brief for UW Madison’s Institute for Research on Poverty here.) So 67 percent – that’s 2 out of every 3 – of low income and poor households receive no housing subsidy or assistance at all, even though their income level is such that they could qualify for housing assistance.

Why?  Because unlike many other social safety net programs (such as Medicaid, Medicare, Social Security, etc.) housing assistance programs are not classified as “entitlements.”  Now there is a lot of confusion about the meaning of the term “entitlement” in public policy and public discussions. The term “entitlement” is a technical and budgetary term.  An “entitlement program” (sometimes called “mandatory spending” programs) is one for which persons who are entitled to receive benefits will receive those benefits.  There is no cap on enrollment or the level of spending.  Congress does not appropriate (authorize spending) a set level of spending or number of beneficiaries in its annual budget cycle for entitlement programs, although it can adjust the level of spending by changing eligibility rules.

Direct housing assistance programs are not entitlement programs but fall under the category of “non-defense discretionary” programs. They are subject to annual appropriations from Congress.  So, for example, the Housing Choice Voucher program (the largest direct rental-housing assistance program in the US, often called “Section 8”) is subject to annual appropriations from Congress to specify the number of vouchers available.  You can read more about the difference between “entitlement programs” and non-defense discretionary programs here.

As a result of federal budget policies (including sequestration), overall federal spending on rental assistance programs has declined since 2010, even as the number of low-income renter households has increased.  You can read more about these numbers here.

Because housing programs are not “entitlement programs” most households whose income would otherwise qualify them to receive assistance actually receive no assistance at all.  There are long waiting lists for the voucher program and excess demand for units with reduced rents.

I realize that housing policy is an area of many complicated programs, acronyms, and funding sources.  It can be so confusing.  Many myths abound.

So the key point to remember is how these two key facts shape housing outcomes described for the families and landlords in the book Evicted.

The majority of low-income renter households in the United States acquire their housing on the private market without any rental or housing assistance.  These households not only struggle with housing stability but with being able to afford the rents.  When families pay most of their income in rent, there is not enough money for transportation, food, education, health care or other essential needs.

How big is this problem?  Every two years, HUD produces a report called “Worst Case Housing Needs.”  This report looks at the housing needs of low-income households who do not receive any housing assistance and who spend more than half of their income on rent or who live in substandard housing (or both).  In 2013 (latest year of data), the report identified 7.72 million households (41 percent of all low-income renter households) as representing these worst cases of housing need.  These 7.72 million households may live lives much like those described in the book Evicted.

 

Here in the Madison/Dane County area, I recently updated numbers to show that over 21,000 households in Dane County fall into this category of the most severe housing needs.  The Dane County Housing Authority had a Voucher waiting-list which was closed from 2007 to 2015 – it took over 8 years to service all of those who applied and were qualified in 2007.  In 2015, the waiting list opened again for only 1 day and closed again after only 4 hours because of a large number of applicants.  We will discuss the Voucher program more in future posts.

[1] Department of Housing and Urban Development, Comprehensive Housing Affordability Strategy; available at: https://www.huduser.gov/portal/datasets/cp.html.
[2] For this analysis, “low-income households” are those households whose income is at or below 50% of the median-household-income for the area where they live. In the technical language of HUD programs, households with incomes at or below 50% of the area median income are classified as “very low income households.”
[3] Source: “Housing Markets and Structural Policies in OECD Counties.” Economics Department Working Paper No. 836, Organization for Economic Co-Operation and Development (available at: http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ECO/WKP(2011)5&docLanguage=En)

 

By Kurt Paulsen, Professor of Urban and Regional Planning at UW-Madison. Professor Paulsen studies and teaches housing policy and affordable housing. He will provide occasional blog posts this year connecting the book Evicted to current events and housing policy developments.