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Analysis of Worst Case Housing Needs in 2011

The latest HUD analysis of recent trends in worst case needs for affordable rental housing examines changes that occurred between 2009 and 2011. The term “worst case needs” is defined as very low-income renter households earning less than 50 percent of the area median income who do not receive government housing assistance and who pay more than half of their income for gross rent (rent and utilities), live in severely inadequate conditions, or both. HUD’s study indicates that the number of U.S. renters facing worst case housing needs is growing rapidly, with 44 percent of the nation’s 19.27 million very low-income renters facing worst case needs in 2011. The number of renter households with worst case needs increased from 7.10 million in 2009 to 8.48 million in 2011—a 19.4 percent increase. The number of worst case needs in 2011 was 43 percent greater than in 2007 and 69 percent greater than in 2001. HUD’s estimates of worst case needs are based primarily on data from the American Housing Survey, which is funded by HUD and conducted by the U.S. Census Bureau.

Findings

Of the two factors that indicate worst case needs among unassisted very low-income renters, severe rent burdens account for the vast majority, 96.9 percent of worst case needs in 2011. Another 3.1 percent of households had worst case needs because they lived in severely inadequate housing conditions, and 3.6 percent of the households faced both of these challenges.

HUD’s analysis of severely burdened renters is consistent with the housing cost burdens analysis presented in “The State of the Nation’s Housing 2013,” a report by the Joint Center for Housing Studies of Harvard University. The Joint Center reports that in 2011, 42.3 million households (37%) faced housing cost burdens, paying more than 30 percent of their pre-tax income for housing, including 20.6 million households (17.9%) with severe cost burdens, paying more than 50 percent of pre-tax income for housing. In particular, the number of severely burdened renters increased by 2.5 million from 2007 to 2011 and accounted for 27.6 percent of the total number of cost-burdened households in 2011.

Demographics of Worst Case Needs

The HUD study shows that worst case needs exist among all major racial and ethnic groups and household types. From 2009 to 2011, the number of very low-income renters increased 24.5 percent among Hispanics, 10.9 percent among non-Hispanic whites, and 2.5 percent among non-Hispanic blacks. During this 2-year period, 48 percent of new occurrences of worst case needs were found among white households, 28 percent among Hispanic households, and 13 percent among black households. Classification by household type indicates that among all households with worst case needs in 2011, families with children accounted for 38.2 percent, “other nonfamily” households (single adult households or unrelated people sharing a housing unit) accounted for 35 percent, and elderly households without children and “other families” households accounted for the remaining 26.8 percent.

Root Causes for the Increase

HUD’s study revealed that economic and demographic factors are two reasons for the substantial increase in the number of households with worst case needs from 2009 to 2011. The population of very low-income renters who are susceptible to having worst case needs increased by 14.3 percent from 2009 to 2011, accounting for 76.6 percent of the total increase of 1.38 million new cases of households with worst case needs during the period. This increase in the population of vulnerable renters was attributable to several factors, including new household formation, a significant number of homeowners who switched to renting, falling incomes among renters, and a shortage of rental assistance. Figure 1 below shows the demographic and economic factors in increasing worst case needs from 2009 to 2011.

Figure 1. Causes of Increase in Worst Case Needs, 2009-2011


Source: U.S. Department of Housing and Urban Development, 2013. "Worst Case Housing Needs 2011:
Report to Congress."

 

Economic problems and foreclosures turned numerous homeowners into renters, which accounted for 37.3 percent of the increase in worst case needs from 2009 to 2011. The decline in renters’ incomes brought on by the economic recession also caused many renters to slip into the very low-income renter group, accounting for 14.7 percent of the increase in worst case needs from 2009 to 2011. During this 2-year period, new households were formed at a rate of 2.9 percent, which exceeded the average biennial increase of 1.8 percent observed in American Housing Survey samples since 2001. The formation of these new households increased the population of vulnerable renters and accounted for 15.4 percent of the increase in worst case needs during this 2-year period. The shortage of rental housing assistance relative to the increased population of very low-income renters accounted for 9.2 percent of the increase in worst case needs from 2009 to 2011.

Growth in the number of unassisted very low-income renters triggered increased demand and competition for the limited supply of affordable rental housing, which in turn drove up rents and increased the prevalence of worst case needs in the vulnerable renter population from 55.2 percent in 2009 to 57.8 percent in 2011. This increased competition for affordable units accounted for 23.4 percent of the total increase in worst case needs during the 2-year period.

Implications

During a surge in the number of very low-income renters, neither the supply of affordable housing units nor government rental assistance in the form of vouchers have kept up with the demand, causing worst case needs to increase dramatically. The widening gap between the number of assisted housing units and the number of households with severe housing needs highlights the importance of housing assistance programs as well as the preservation and production of affordable housing units for providing stable housing to very low-income renters.