"Critical" housing needs among US households

WASHINGTON (MarketWatch) -- The proportion of households in the United States with "critical" housing needs is growing, accounting for about 17% of households in 2005, according to a report released Thursday.

The percentage of all U.S. households with critical housing needs is up from 14.2% in 2003 and 14.5% in 2001, according to a report from Center for Housing Policy, the research affiliate of the National Housing Conference. Two criteria describe critical housing needs: spending more than half of income for housing and/or living in dilapidated conditions.

"What we see in this report is the situation before the other shoe drops," said Barbara Lipman, research director for CHP.
Lipman said she is concerned that housing troubles could worsen for both renters and owners in coming years, as problems in the subprime mortgage market are reflected in the larger housing market.

"As interest rates reset, [borrowers] will have to pay larger portions of income for housing. Some will be finding themselves back in a rental market that is already strained, and doesn't provide enough opportunity now," she said. "We're very worried."
The total number of U.S. households with critical housing needs rose to 17.5 million in 2005 from 14.3 million in 2003, with much of the gain by nonworking households, such as the elderly, according to the report.

The availability of affordable housing has not kept pace with demand, Lipman said. "We have not been adding housing for lower and moderate market rentals," she said.

The number of low- to moderate-income working-family renters that spends more than half of income for housing grew 103% to 2.1 million in 2005 from 1 million in 1997, according to the report. Among all low- to moderate-income working families, 5.2 million experienced critical housing needs in 2005, compared with 3 million in 1997, according to the report.
Many low-income households include elderly and disabled members, as well as low-wage earners working full time at jobs that keep communities working, said Nicole Letourneau, a spokeswoman with housing advocate National Low Income Housing Coalition.

Production of affordable housing lags
There's a shortage of 2.8 million homes renting at prices that would be affordable to the more than 9 million low-income renter households throughout the nation, according to NLIHC.
"That shows that the need for more affordable housing is acute," Letourneau said.
John Taylor, president and chief executive of nonprofit National Community Reinvestment Coalition, said he sees home foreclosures hurting whole communities, making it even more difficult for troubled borrowers to find a good housing situation.

"Existing homeowners...are going to find a real constriction of credit," he said.

There are good solutions that have worked to support housing in local communities, such as making it easier and more profitable for builders to work on low- and middle-income projects and being more creative about land use, Lipman said, adding that national support would also be a good idea.
In late July, a House panel approved creating a national affordable housing trust fund with a goal of producing, rehabilitating and preserving 1.5 million housing units over the next 10 years. House floor action is expected in September.
It's also important to educate home buyers about the benefits and risks of homeownership, so that they don't take on obligations that they can't afford, Lipman said.

Ruth Mantell is a MarketWatch reporter based in Washington.