Featured Article
HUD USER Home > PD&R Edge Home > Featured Article

Secretary Donovan Highlights Convening on State of America’s Rental Housing

Exterior image of three-story multifamily buildings, connected by sidewalks and flanked by trees and shrubs. “We are in the midst of the worst rental affordability crisis that this country has known,” said HUD Secretary Shaun Donovan in his keynote address at a December 9 event in Washington, DC. The event, hosted by Harvard’s Joint Center for Housing Studies, marked the release of the center’s report on the state of the country’s rental housing market, America’s Rental Housing: Evolving Markets and Needs.

The Secretary’s remarks highlight the dire circumstances facing many of America’s renter households and underscore some of the key findings of the Harvard study. Among these is the rapid increase in the share of U.S. households that rent — rising from 31 percent in 2004 to 35 percent today. The rising demand for rentals — fueled in part by the foreclosure crisis and other demographic shifts — as well as declining wages and the loss of lower-cost units from the rental stock have combined to push more and more households into financially burdensome rental situations.

Since 2000, the share of households paying more than 30 percent of their monthly income toward rent has grown by 12 percent. Today, half of all renters face housing cost burdens that exceed 30 percent of their monthly income, and 28 percent are paying more than 50 percent of their income for housing. The affordability crisis is particularly acute for the poor. Of those earning approximately $15,000 annually, 83 percent are housing cost burdened, with 71 percent paying more than half their income in rent. PD&R’s latest report to Congress on worst case housing needs further amplify the magnitude of the rental affordability crisis. Over the period from 2009-2011, approximately 8.48 million very low-income renters (those earning less than 50 percent AMI) suffered from worst case housing needs, up from the previous high of 7.10 million in 2009.

While acknowledging that the “silent crisis” of rental affordability has largely been overshadowed by the collapse of the homeownership market, Secretary Donovan outlined some of HUD’s key efforts to provide effective solutions to the crisis.

Among these, the Secretary stressed the need to preserve the existing stock of affordable units, outlining the transformative potential of the Rental Assistance Demonstration (RAD) to stem the loss of public and private assisted housing units. Along with allowing public housing agencies (PHAs) to access the private financing needed to address the massive backlog of capital needs in public housing (approximately $26 billion), Secretary Donovan discussed the role that RAD will play in allowing PHAs to become more dynamic agents in community development, as has been done through the HOPE VI program in the past and with the Choice Neighborhoods program today. For housing and community development professionals across the country, RAD can help overcome rental housing program silos and create a stronger, more unified voice in support of investments in rental affordability by shifting more federal housing assistance to the Section 8 platform.

With applications already submitted to convert approximately 110,000 units through RAD, HUD expects to reach the congressionally set 60,000-unit statutory limit by early 2014. Given the strong support for RAD from project sponsors nationwide, the Secretary underscored the importance of expanding RAD in 2014 beyond its initial cap level.

Addressing the rental crisis will require creating greater affordability across all multifamily building types. With this need in mind, the Secretary briefly discussed HUD’s Small Multifamily Building Risk Share Initiative. Part of the FHA’s 542(b) Risk Share program, the small building initiative aims to expand financing available to affordable housing developments that contain between 5 and 49 units; nearly a third of all rental units are within this stock. The Secretary noted that preserving these smaller buildings can be challenging, but is of critical importance. Research has shown that the smaller multifamily market lacks the standardization, sophistication, and economies of scale that has helped finance larger properties through the development of the secondary multifamily mortgage market. As a result, many of these properties are at risk of disinvestment or to being converted to higher-end units.

Identifying owners of this stock as the “unsung heroes of the rental housing market,” the Secretary asked for comments on the notice by January 3, 2014. The Secretary also highlighted the importance of connecting new and existing investments in affordable housing to local and regional economic development opportunities through its place-based efforts, including the Office of Sustainable Communities local and regional planning grants, Choice Neighborhoods program, and the White House’s Promise Zones initiative.“ It is simply wrong in this country that you can put a child’s address into Google Maps and predict their future,” noted the Secretary in discussing the role that place plays in determining success.

The Obama administration has made funding for rental housing a priority and, in closing, the Secretary highlighted the enormous opportunity that housing finance reform presents to relieve the affordability pressure in today’s rental market: “We have a once in a generation opportunity to build new investment in rental housing…we will continue to fight for a consistent, non-appropriated source of funding…that yields a major source of new funding for the production of affordable rental housing, preservation, and important support of affordable homeownership, as well….we also need to ensure that we're not only fighting to preserve the low-income housing tax credit and tax exempt bonds, but to expand them.”