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Recent record-setting surges in home prices and rents have exacerbated longstanding housing affordability challenges, a housing studies leader told members of the U.S. House Committee on Ways and Means during testimony in mid-July.
A comprehensive, substantial approach by public, private and nonprofit sectors is needed to alleviate the housing crisis, stated Dr. Christopher Herbert, managing director at Harvard’s Joint Center for Housing Studies (JCHS) and a lecturer in the Department of Urban Planning and Design at the university’s Graduate School of Design.
Drawing from this year’s JCHS annual report, The State of the Nation’s Housing, Herbert emphasized the new supply of housing is failing to keep pace with demand. The pandemic boosted housing demand resulting in worsening housing affordability for both would-be homebuyers and renters.
During his testimony, Herbert described the consequences of high housing cost burdens for the lowest income households, noting these significant burdens lead to reduced spending for food and healthcare and increasing housing instability. Quality housing is “foundational for a healthy and productive life for every person in America,” he said to committee members.
Investing in good quality, affordable and secure homes in thriving communities “would pay dividends to society as well, in a more productive workforce, lower public spending for healthcare and other supports, and enhanced economic activity in the important housing sector,” Herbert emphasized in his prepared remarks.
Among conditions and challenges of today’s housing market the JCHS director highlighted during his remarks, which he titled, “Nowhere to Live: Profits, Disinvestment, and The American Housing Crisis,” were:
- Record-setting gains in home prices and rents.
- Tight market conditions being a key driver of rising prices for both buyers and renters.
- Surging housing demand, particularly among millennials, but also from investors in the single-family market.
- New construction lagging demand over the past decade. In addition to not keeping pace with household growth, new supply has been concentrated in larger, more expensive buildings, while in the multifamily market, new apartments have been concentrated in larger buildings in prime urban locations. Also, Herbert added, land use regulations and disruptions in the availability of building materials have constrained supply in many communities.
- Trends in housing affordability. “Importantly, racial inequalities in the housing market and the broader economy are clearly reflected in disparities in the incidences of housing cost burdens,” Herbert emphasized, citing figures from the 2020 American Community Survey.
- Homebuyer affordability deteriorates. To illustrate his point, Herbert used Freddie Mac data showing the impact of rapidly rising home prices and sharply higher interest rates.
- Worsening affordability likely to exacerbate racial disparities in homeownership. In his testimony, Herbert said “The difficulty in achieving homeownership has significant consequences for opportunities to control housing costs over time and to build wealth.”
- Consequences of high housing cost burdens. Cost-burdened households made difficult tradeoffs to meet basic needs, such as for food and healthcare. Unaffordable housing costs also increase housing instability.
Looking ahead, Herbert told committee members it seems likely that the share of both renters and owners spending more than 30 percent of the income on housing will continue their upward climb.
To alleviate the housing crisis, the JCHS manager said concerted efforts by both the public and private sectors are needed, along with supply side interventions and demand side supports. Additionally, expanded public subsidies will be necessary to increase the supply of deeply affordable housing available both for rent and to own. He also favors supports for homebuilders to adopt more efficient construction methods.
“The Neighborhood Homes Investment Act deserves serious consideration as a tool for expanding the supply of good quality homes and homeownership opportunities in these communities,” Herbert suggested. Finally, he urged for “greater efforts to expand opportunities for people of color to own homes and narrow the substantial shortfall in homeownership rates by race and ethnicity.”