Worst Case Housing Needs Reach Highest Level in 2021 as the Pandemic Exacerbates the Persistent Shortage of Affordable Housing

Worst Case Housing Needs Reach Highest Level in 2021 as the Pandemic Exacerbates the Persistent Shortage of Affordable Housing

HUD’s Worst Case Housing Needs: 2023 Report to Congress, its 19th biennial report, reveals that in 2021, during the COVID-19 pandemic, 8.53 million renter households had worst case housing needs — the highest level recorded since 2011, when 8.48 million renter households experienced worst case housing needs following the Great Recession. Renter households experiencing worst case housing needs are those that are very low-income (VLI) and earn no more than 50 percent of the area median income (AMI) and those that are extremely low-income (ELI) that earn less than 30 percent of AMI; receive no government housing assistance; and face severe housing cost burden (spending more than 50 percent of their income on rent and utilities), reside in severely inadequate housing, or both. Data for the report are derived from the 2021 American Housing Survey (AHS), a national survey conducted since 1973 that examines a range of demographic and market factors affecting the affordability, availability, and adequacy of housing for low-income renters. Although the report found that the pandemic and its associated economic fallout influenced the level of worst case housing needs in 2021, the AHS did not count one-time federal stimulus payments in its measurement of household income. Such government support likely helped address the significant housing needs of many renter households with worst case needs.

Extent of Worst Case Housing Needs

The report finds that all demographic groups, household types, and U.S. regions (except for the West) experienced increases in worst case housing needs between 2019 and 2021. The 8.53 million renter households experiencing worst case housing needs in 2021 represent an increase of 760,000 cases from 7.77 million renter households in 2019. In the years since the Great Recession, the prevalence of worst case housing needs among VLI renters has grown, reaching 44.1 percent in 2021, an increase of 1.9 percentage points from 2019.

Between 2019 and 2021, worst case housing needs increased by 3.2 percentage points for VLI non-Hispanic Black renters, 2.3 points for Hispanic renters, 0.4 points for non-Hispanic white renters, and 12.2 points for renters of other races or ethnicities. Households led by people of color accounted for 57.2 percent of worst case housing needs in 2021. In addition, households composed of families with children and other nonfamily members accounted for 30.8 percent of households with worst case housing needs, the largest percentage of households, followed by older adult households without children (27.6%) and other family households (10.8%). Between 2019 and 2021, VLI renter households with children experienced a 4.2 percent increase in worst case housing needs, and the share of these households receiving housing assistance declined from 25.6 percent to 23.8 percent. Of the 8.5 million renter households with worst case housing needs, the largest proportion lived in the South (3.17 million), followed by the West (2.25 million), Northeast (1.62 million), and Midwest (1.48 million) regions. Between 2019 and 2021, the prevalence of worst case housing needs grew by approximately 2 percentage points in all of these regions except for the West, where the prevalence fell by approximately 1 percentage point.

Shortage of Affordable Housing

The report states that the nation's supply of affordable rental housing is increasingly insufficient to meet the demands of VLI and ELI renter households. HUD uses a comprehensive measure that calculates rents based on affordability, availability, and adequacy, an approach that assesses not only the supply of affordable units available at various income levels but also their physical adequacy. In 2021, the report found a significant mismatch between the number of ELI households and the number of affordable, available, and adequate units. For every 100 ELI renter households, only 32 units met these conditions. For every 100 VLI renter households, only 50 physically adequate units were both affordable and available to them. Between 2019 and 2021, the number of affordable housing units for ELI renter households decreased by 757,000. Although all regions of the country lack enough affordable rental housing to meet the needs of the VLI population, some variance exists, with the West having the least amount of affordable housing available (43 units per 100 VLI renter households) and the Midwest having the most availability (72 units per 100 VLI renter households). Compounding the problem of the West's high rates of worst case housing needs is the region's low rate of housing assistance.

Understanding the Trends and Policy Responses

HUD’s analysis of the increase in worst case housing needs in 2021 focused on four drivers of demand for affordable housing— household formation, income, rental assistance, renter share of households and the market response in terms of competition for affordable units. The 2023 report found that the net increase of 760,000 households experiencing worst case housing needs is due to both demographics (515,000 additional cases) and market response (245,000 additional cases). Of these factors, the increase of 4.37 million households in the United States between 2019 and 2021 accounted for many of the new cases of worst case housing needs (282,000 cases). Other factors, including a significant decrease in rental household income because of economic disruption from the pandemic, led to an additional 175,000 households experiencing worst case needs. Rental assistance did not expand to meet the increase in VLI renter households during this period, leading to 102,000 more cases of worst case needs. A small decline in the percentage of renter households accounts for a reduction of 43,000 cases. Overall, the report finds that increased competition for limited affordable housing, especially because of an increase of 800,000 renter households earning between 50 and 80 percent of AMI, put substantial pressure on the number of affordable housing units available to VLI renters. This point about competition is underscored by the decline in the rental vacancy rates; only 3.7 percent of vacant units are affordable to ELI renters, and 7.6 percent of vacant units are affordable to households earning incomes of 30 to 50 percent of AMI.

HUD's 2023 report affirms the need for policies that support increased housing production, access to affordable units, and rental assistance that meets the needs of vulnerable families struggling to rent a limited number of available homes that are affordable and adequate. The report asserts that the effects of the COVID-19 pandemic on worst case housing needs have been complicated. Although the AHS might not have captured the effect of federal income supports and housing stability protections during the pandemic, the ongoing challenges posed by inflation and macroeconomic conditions support the need for income supports for VLI renters, reductions in regulatory barriers to affordable housing production, and federal technical assistance to local governments. The report also suggests that increasing landlord participation in HUD's Housing Choice Voucher program could ameliorate housing needs among VLI renters by allowing them to compete with higher-income renters for units with higher rents.