A House-Poor Nation

While the subprime mortgage crisis has garnered worldwide headlines for over a year now, politicians and the media have largely ignored the shortage of affordable units in metropolitan areas nationwide. How far does the affordable housing crisis extend? According to a 2007 study by the Joint Center for Housing Studies of Harvard University, one in seven American households is "severely housing cost-burdened," spending more than half its income on housing. The same proportion of Americans lacks health insurance. The desperately poor aren't the only population that overspends on accommodations either; in 2005, 42 percent of the increase in severe cost burdens happened in households in the middle two income quartiles.

The core of the problem is a mismatch between the demand for and supply of moderately priced housing stock. While the housing bubble only marginally affected the rental market, wages did not keep up with inflation, meaning a diminishing number of workers found market-rate units within their budget. In its 2007-08 annual report, Out of Reach, the National Low Income Housing Coalition (NLIHC) calculated that to pay the nation's average fair-market rent for a two-bedroom rental apartment, a full-time worker must earn $17.32 per hour, 2.5 times the minimum wage.

Meanwhile there's been a significant underproduction of affordable units, thanks to market failure and government inaction. In many economically vibrant cities, where the housing crunch has been most acute, developers have shifted resources to projects that yield higher profits and away from those offering consumers long-term stability. In Chicago, for example, an estimated 100,000 rental apartments were replaced by condominiums between 1989 and 2004.

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