A report from the Terner Center for Housing Innovation at UC Berkeley, “Recession and Recovery: The Critical Role of Housing Assistance in Promoting Economic Security for Low-Income Households,” examines how affordable housing influences economic mobility. The report finds that the length of a household’s tenure in subsidized housing is positively associated with increases in household income over time. Employed residents living in subsidized housing saw household incomes rise 20% in real terms between 2004 and 2019. Almost all income gains, however, went to households making more than $40,000 per year. The report documents evidence that very low-income workers, seniors, and people with disabilities need greater subsidies than the Low-Income Housing Tax Credit (LIHTC) program can provide.
The authors examined longitudinal data on California families who moved into subsidized housing managed by Eden Housing, a nonprofit housing developer, between 2003 and 2019. The study sample included 9,864 households: 6,405 in LIHTC units, 1,856 in HUD and rural development subsidy programs, and 1,603 in LIHTC units that also received other HUD subsidies. HUD and rural development subsidies include the Housing Choice Voucher program, the HOME Investment Partnerships Program, project-based Section 8, and the USDA Rural Development program.
The residents in LIHTC units without additional subsidies had higher incomes: the average household income for all residents in LIHTC units was $35,873, compared to $15,785 for households just receiving HUD subsidies and $17,866 for households receiving multiple subsidies. Residents living in HUD-subsidized units are older, have fewer household members, and are more likely to have a disability. Sixty-nine percent of households in LIHTC units are employed, compared to 16% of those living in a HUD-subsidized unit and 23% of those receiving multiple subsidies.
Employed residents in LIHTC units had significantly higher incomes than those living in HUD-subsidized units. The average income of employed households moving into LIHTC units was $40,458, while the average for employed households moving into other HUD-subsidized units was $26,200. Retired households and households receiving Supplemental Security Income (SSI) in LIHTC units had higher incomes than counterparts in HUD-subsidized units. The authors infer that LIHTC rents are often too high to be affordable to households earning less than 50% of the area median income.
The Great Recession had depressed incomes among employed households in Eden housing, but California’s subsequent economic expansion led to significant household income growth for all households with at least one employed adult. Average LIHTC incomes rose from $41,649 in 2014 to $56,275 in 2019. The rise in average income is not just a byproduct of households with higher incomes moving into subsidized housing, as the average income at move-in in recent years has been lower than previous cohorts. Rather, the stability offered by housing assistance may play a role in the economic advancement of these households. All racial and ethnic groups saw income gains over time, though Black residents continue to have the lowest household incomes on average. Even though household incomes grew for these households, only 4% of residents who listed a reason for moving out when leaving Eden’s housing indicated they were able to afford a home on the private market—so higher incomes did not translate into broad access to unsubsidized homes.
The report finds that income growth has been flat for households earning less than $40,000. For households with incomes less than $25,000, incomes declined during the Great Recession and never recovered. Lower-income workers also experienced significant income volatility. Between 2010 and 2013, more than 35% of households living in Eden properties experienced a year-over-year decline of more than 10% of their incomes, and one quarter experienced a drop of more than 30%.
Using regression analysis, the authors found that larger households, households with more employed adults, households with older household heads, households in LIHTC properties, and households who had been in subsidized housing longer have larger household incomes. The subsidy type is not associated with whether a household’s income increases over time, but the researchers did find that length of tenure in subsidized housing is associated with the likelihood that a household’s income increases over time.
The authors posit that affordable and stable housing provides a platform for economic mobility, arguing that the evidence of income volatility shows the need for expanded access to rental subsidies, more targeted programs to serve extremely low-income households, more private-market housing affordable to households earning between 80% and 120% of AMI, and policies that raise wages at the lower end of the labor market.
Read the full report at: https://bit.ly/2FpPOQi