Key takeaways on affordable rental housing shortage from The Gap report (2023), published by the National Low Income Housing Coalition.

The National Low Income Housing Coalition (NLIHC) came out with their annual report, The Gap, in March. The report outlines the ways in which the nation’s lowest-income renters continue to face severe housing shortages, despite the flattening of rent prices in the beginning of 2023. At Builders Patch, we compile a high-level summary for our readers, with key takeaways from this report. Let's take a look at what the state of housing looks like across the country, with a special focus on Extremely Low Income (ELI) renters. (Take a look at our previous year's GAP report summary for comparison)

Who are the extremely low-income renters in the US?

When talking about low-income households, the most vulnerable amongst them are the ELI, or extremely low-income group, mostly consisting of those who work very low-wage jobs or do not have any paying job at all, and their income is below 30% AMI (area median income).

The breakdown for the 2023 stats are detailed in the figure below. According to 2021 labor force data, 39% of extremely low-income renter households in the labor force worked at least 40 hours per week and 30% worked between 20 and 39 hours per week.

However, low-wage employment does not provide income adequate to afford housing. As a full-time worker, you need a national average wage of $21.25 and $25.82 to afford a modest one-bedroom and two-bedroom apartment, respectively. Unfortunately, eleven of the 25 largest occupations in the country, including home health aides, janitors, nursing assistants, and food servers pay a median wage that is far less than this.

A severe shortage of affordable and available rental homes

Low-income renters across the US are facing an acute shortage of affordable and available housing. While households with higher incomes (above area median income) have a cumulative surplus of affordable homes (46m units available to 12.5m high-income households), extremely low-income renters are facing an absolute shortage of 4 million rental homes, a jump from 3.6m as per the 2022 report.

  • Extremely low-income renters face the most acute housing crisis
    11 million extremely low-income renter households account for 25% of all renter households and 9% of all U.S. households. They are a numerically significant demographic that is facing the most acute housing crisis in the U.S. There are only 7 million affordable rental homes available to these 11 million households, a decline from the 7.4m that was affordable to them last year.
  • Statewide shortages in affordable and available homes for ELI renters
    In 12 states, more than three-quarters ELI renters are severely housing cost-burdened, with the largest shares in Nevada (86%), Florida (83%), Oregon (80%), Arizona (80%), and Texas (79%). Maine and Rhode Island have the smallest, but still significant, percentage of extremely low-income renters with severe cost burdens, with 52% and 60%, respectively.

ELI renters have fewer housing options now than pre-pandemic

ELI renters are the hardest hit by the housing shortage across the country. The report finds that the ELI group are the only income group to face this absolute shortage of affordable homes; for all other income groups, there are enough affordable rental units to accommodate all households

  • Extremely low-income households account for one-quarter, or 11 million, of the nation’s 44.1 million renter households.
  • Extremely low-income renters face the most severe shortage of housing, with only 7.0 million affordable rental homes for 11.0 million households.
  • Of those 7.0 million rental units, 3.3 million are occupied by higher-income households, leaving only 3.7 million rental homes that are both affordable and available for extremely low-income renters.
  • Overall, there is an absolute shortage of 4.0 million affordable rental homes for extremely low-income households.

A major challenge for ELI households is not just the affordability of homes, but also the availability. As detailed above, of the 7.0 million rental units affordable to ELI households, 3.3 million are already occupied by higher-income households. This phenomena is fairly common and there is no mechanism in the market to prevent high-income households from occupying rental homes that are affordable to lower-income households. Unfortunately, ELI renters have to routinely compete with all higher- income households for the limited number of rental homes affordable to them in the private market.

Why has the shortage of affordable and available rental homes for ELI renters worsened?

Between 2019 to 2021, the shortage of affordable and available rental homes for ELI renters went from 6.8 million to 7.3 million. The report outlines three reasons for this increase in shortage:

1. Increase in the ELI renter population - The number of extremely low-income renter households increased from 10.8 million in 2019 to 11.0 million in 2021. According to the report, this increase may be due, at least in part, to greater unemployment and employment volatility following the onset of the COVID-19 pandemic.

2. Decrease in supply of affordable and available homes for ELI renters - In 2021, median rents skyrocketed, increasing 18% between January 2021 and January 2022 (Apartment List, 2022). High rents combined with record low rental vacancy rates, paint a picture of a housing market which is largely unaffordable and short on stock for the ELI renter population. As a result, affordable and available homes for ELI renters dropped from 7.4 million to 7.0 million between 2019 and 2021.

3. Increase in the number of higher-income renters occupying units affordable to ELI renters - The report finds that the number of higher-income renters living in units affordable and available to ELI renters actually declined from 3.4 million to 3.3 million between 2019 to 2021. So while this reason cannot be attributed to the increase in shortage, it continues to make 3.3 million affordable units, unavailable, to the ELI renter population.

As a result, ELI renters continue to be the most cost-burdened population, when it comes to housing in the United States. An extremely low-income family of four with a monthly income of $2,312 paying the average two-bedroom fair market rent of $1,342 only has $970 left each month to cover other expenses (National Low Income Housing Coalition, 2022a).

Racial and ethnic disparities in access to affordable housing for ELI renters

The shortage of affordable and available housing disproportionately affects Black, Latino, and Native and Alaska Native households, as these households are both more likely to be renters and to have extremely low incomes. Households of color are more likely to be renters and have extremely low-incomes, compared to white households.

  • 57% of Black households are renters and 19% are extremely low-income renters.
  • 52% of Latino households are renters and 14% are extremely low-income renters.
  • 27% of white households are renters and 6% are extremely low- income renters.
  • The 2021 ACS indicates that the median annual income of Black households was $46,774, nearly $30,000 less than the median income of white households ($75,412). The median annual income of Latino households was $60,566, and the median annual income for American Indian and Alaska Native households was $53,149.
  • These disparities reflect the fact that Black and Latino workers are less likely to work in sectors with higher median wages and tend to be paid less than white workers even within the same occupations.

These disparities are a result of decades of racial discrimination by banks, real estate agents, insurers and the federal government. The road to homeownership is paved with disproportionate challenges for households of color, including access to capital, limited access to loans and low-incomes.

Local solutions to affordable housing devel

Federal and local solutions to affordable housing development

The report suggests several local tools to address housing affordability, that should be prioritized in long-term federal and State policy around housing.

  • Exclusionary zoning that favors the development of single-family homes, limits high-density housing, and is a leading cause of the constrain on the supply of housing. These practices also raise prices because they typically increase the amount of land needed for each home. Zoning amendments, such as the one we reviewed for Governor Kathy Hochul's Housing Compact for New York, are required to boost the supply of affordable housing.
  • State and local government housing programs, like housing trust funds and affordable housing bonds, are heavily encouraged for boosting affordable housing development. This is because funds from these sources target development for renters with specific income levels or at special populations.
  • Between fiscal year (FY ) 2011 and FY2017, HUD experienced seven consecutive years of real budget cuts after accounting for inflation. Even with significant increases in HUD’s appropriations in recent years, HUD’s cumulative appropriations since FY2010 are still slightly lower than if annual appropriations had remained at FY2010 levels.
  • Congress must boost funding for both preserving the stock of existing affordable housing and increasing the supply of deeply affordable units. Congress must also act to increase resources for rental assistance through Housing Choice Vouchers or a renters’ tax credit.
  • Congress should enact federal renter protections such as source-of- income protections to prevent landlords from discriminating against voucher holders, “just cause” or “good cause” eviction standards, access to legal counsel to put renters on more equal legal footing with landlords, expungement of eviction records, and limits on rent gouging.

Conclusion: long-term federal policy solutions are critical for lowest-income renters

Lowest-income renters are facing the brunt of cost-burdened housing in the United States and federal assistance programs are falling behind. There is a need for long-term investments in federal housing policy, specifically catered to improving housing security among the lowest-income renters. The report also suggests the need to parallelly focus on the short-term housing needs of this vulnerable demographic. A permanent emergency housing assistance fund can prove useful for lowest-income renters facing housing instability, evictions, and other economic shocks.

View the original report by the National Low Income Housing Coalition.

Sumedha Bose
Builders Patch Staff

Sumedha is a seasoned urban policy expert specializing in international housing policy. Armed with dual Master’s degrees from the prestigious Tata Institute of Social Sciences in Mumbai and Institut d’études politiques in Paris, she brings a wealth of knowledge and international perspective to her field.