The lack of affordable homes in the United States has been a growing concern for a number of years. American home buyers may be unaware of the fact that the crisis is impacting the rental market as well. According to the National Low Income Housing Coalition, the US is 7.3 million units short when it comes to affordability and availability for low-income renters. Put more simply, for every 100 extremely low-income rental households looking for shelter in America, only 34 will be able to find and afford housing.
The gap between renters and available rental units varies by region. South Dakota leads the nation, though only 57 out of 100 in-need renters can find affordable units in the state. Nevada ranks last, with just 12 homes for every 100 extremely low-income renter households.
Before further examining America’s rental crisis, it can be helpful to understand important housing terms. Affordable housing is made available to extremely low-income and low-income households. The Department of Housing and Urban Development defines extremely low income as a person or family with a total annual income that is 30 percent or less than the regional median income. The median income for American households was $74,580 in 2022, meaning extremely low-income households would earn $22,374 or less.
Cost burden is another important term when it comes to the rental shortage in America. A cost-burdened household spends more than 30 percent of its income on rent and utilities. A household that spends 50 percent or more on these expenses is categorized as severely cost-burdened. Rent is a massive expense for low-income earners in America: nearly 90 percent of extremely low-income renters experience cost burden, and almost three-quarters qualify as severely cost-burdened. Higher-income households can also experience cost burdens. That said, about seven of 10 cost-burdened renters come from low-income households.
While America’s rental crisis is a complex subject, one of the main influencing factors is easy to understand: American workers need to earn an average of $20.30 per hour to comfortably afford a standard two-bedroom rental, nearly three times the national hourly minimum wage of $7.25. A single parent with a child would need to work three minimum-wage jobs to cover rent and basic living expenses. This issue has only worsened over time, with rent increasing by 24 percent over the last three years.
Even if a low-income household works to the point that members feel comfortable looking for a new rental home, the national housing supply cannot keep pace with demand. HUD has established several programs aimed at improving the affordability and availability of rental units in America. The Housing Trust Fund has been specially designed to meet the needs of extremely low-income households. However, the fund has supported the construction of just 2,200 units since 2015.
There are several issues impacting HUD programming. Part of the lack of production plaguing the Housing Trust Fund can be attributed to insufficient monitoring and elevated fraud risk. A Government Accountability Office (GAO) report found that the majority of grant recipients did not adhere to HUD auditing regulations, which have been designed to ensure funds are spent responsibly. GAO made several recommendations for improving HUD program oversight in August 2023.
