In 1999, approximately 25 million households were headed by a person age 62 or older; of these, around 5 million (20 percent) were renters. Older renters often find it difficult to find housing that they can reasonably afford. In fact, about 57 percent of older renter households pay 30 percent or more of their income on housing, compared to 39 percent of younger rental households. Moreover, evidence indicates that the housing situation for older renters may be getting worse. Between 1985 and 1999, the median housing cost for renters age 65 and older grew faster than their income [Figure 1]. By 1999, their median annual housing cost had risen to $5,772, while their median income was $12,608.
The problems experienced by older renters are often complicated by age-related factors. Older persons are more likely to live on a fixed income, which may make it difficult to find affordable housing or absorb rent increases. Older persons are also more likely to be frail, which can make a home search difficult, especially for housing that has architectural features or services that support aging-in-place.
One way to help meet the housing needs of older renters is through federal housing subsidy programs. Since the first major housing legislation was passed in the 1930s, the federal government has taken an active role in providing affordable housing for persons of all ages. In 1999, about 1.7 million households headed by a person age 62 or older benefited from some kind of federal rental housing program - roughly one-third of all households receiving such benefits [Figure 2].
Direct federal funding for new affordable housing is down in recent years, and many of the programs that were used to develop the current stock of affordable housing have been inactive for decades.
Major Federal Rental Housing Programs Benefiting Older Persons
The federal government has used a variety of methods to promote affordable rental housing; often, these methods reflect the changing political philosophies over the past 60 years. For instance, in the 1930's public housing was the key federal program for rental housing. In the 1950's and 1960's, the federal government promoted subsidized mortgages for private developers to build or rehabilitate multifamily housing for low- and moderate-income families. In the 1970's and 1980's, tenant-based rental assistance became the dominant philosophy. In the 1990's low-income housing tax credits and block grants to state and local governments became extremely important tools.
Because of the long duration of most housing assistance contracts, today's subsidized rental housing is a patchwork of disparate programs. This patchwork quality sometimes creates problems in coordinating housing policy for developing needs. For instance, many properties that serve older persons are experiencing an increasing need for supportive services, but the delivery of those services varies from program to program. On the other hand, the advantage to different approaches has been the involvement of a wide variety of entities, (including the federal government, state and local governments, nonprofit groups, and for-profit developers), each of which bring different resources and expertise to the field of affordable housing.
Public housing is federally funded, but owned and operated by local public housing authorities. The program was initially developed in the 1930's to provide temporary housing for working class families. Indeed, single older persons were not even eligible until the mid-50's. Public housing has since developed into long-term rental housing targeted to low-income households.
By the 1970's, well over a million units were in the public housing stock, but there have been no net additional units during the past 25 years. However, many units are being rehabilitated or replaced under the HOPE VI program for revitalization. Approximately one-third of the 1.1 million public housing units are occupied by an older household.
Section 8 New Construction/Rehabilitation
In recent years, Section 8 has typically been associated with tenant-based vouchers. However, when the program began in 1974, it also included subsidized mortgage financing for the construction and rehabilitation of multifamily projects by for-profit developers to serve renters with low-incomes. Primarily for budget reasons, Congress ended the Section 8 construction and rehabilitation program in 1983. Of the existing Section 8 stock of nearly 745,000 units, around 46 percent is occupied by older households.
Section 202 Supportive Housing for the Elderly is the principal federally funded construction program for rental housing for older persons. When it was enacted under the 1959 National Housing Act, the program provided direct subsidized construction loans to private, nonprofit operators of housing for older persons and persons with disabilities. In 1990, the National Affordable Housing Act amended the program to serve only older persons, and created the new Section 811 program for persons with disabilities. In both cases, subsidized direct loans were replaced by capital grants. Around 316,000 older households reside in Section 202 housing. Production in the Section 202 program is well below peak levels of the early 1980s, and is currently about 7,000 units per year [Figure 3].
Section 221(d)(3) BMIR
One of the programs authorized by the National Housing Act of 1959 was the Section 221(d)(3) BMIR program, which insured and subsidized low-interest rate loans to private developers, both for-profit and nonprofit, in order to promote the construction of affordable housing. The program was discontinued in the mid-1960s. Of the nearly 110,000 221(d)(3) BMIR units still existing, about a fifth are occupied by an older household.
The Section 236 program was enacted as part of the Housing Act of 1968 as a replacement for the Section 221(d)(3) program, and it offered prepayment provisions and use restrictions similar to the Section 221(d)(3) program. However, Section 236 mortgages typically had a lower interest rate. This program was discontinued in 1973 because many of the project sponsors experienced cash flow problems, even with the subsidized loan. Nearly 430,000 units built under the Section 236 program remain, of which around a third are occupied by older households.
Authorized in 1962, Section 515 is a direct loan program under which private for-profit and nonprofit sponsors receive a low-interest rate loan from the Rural Housing Service of the US Department of Agriculture in return for renting to persons with low and moderate incomes. Unlike the Section 221(d)(3) and Section 236 programs, Section 515 is still financing the construction and rehabilitation of affordable housing, though funding cuts in recent years have substantially reduced the production of units. Among the 453,000 Section 515 units, 42 percent are occupied by older households.
Low-Income Housing Tax Credit
The Tax Reform Act of 1986 created the Low-Income Housing Tax Credit (LIHTC). Under this program, states are allocated tax credits based on their population. State housing agencies then allocate the credits to private developers who acquire, construct or rehabilitate affordable rental housing. The tax credit is taken over a ten-year period. The amount of the credit is based on the cost of units set aside for low-income households, whether the credits are used for construction, rehabilitation, or acquisition of a property, and whether an additional federal subsidy is involved. Although units for residents with mixed incomes are permitted, in practice most projects consist entirely of units for low-income residents. About 25 percent of the 700,000 affordable units built under this program are occupied by older households.
Until recently, the per-capita tax credit allocation for each state was unchanged from year to year. Consequently, inflation eroded the number of units generated by the program. Congress addressed this problem in 2000 by raising the tax credit cap from $1.25 per capita to $1.75 per capita by 2002, with adjustment for inflation thereafter. This move may help production recover from its gradual decline [Figure 4].
The HOME Investment Partnership Program was created by the Cranston-Gonzalez National Affordable Housing Act of 1990. The HOME program is a block grant program from the federal government to support state and local affordable housing programs. Generally, local jurisdictions are required to match at least 25 percent of the federal grant. A variety of activities are eligible under the program, including tenant-based rental assistance, home ownership assistance, and the development of affordable rental housing. For rental housing, HOME funds may be used for acquisition, rehabilitation, and new construction of units for low-income households. Older households occupy about 16 percent of the 125,000 rental units completed.
Tenant-Based Section 8 Rental Assistance
In addition to the project-based programs above, the Department of Housing and Urban Development (HUD) provides rental assistance to low-income households that can be used to acquire market-rate rental housing. For those landlords who are willing to accept tenant-based vouchers or certificates, HUD pays the difference between 30 percent of the resident's income and a published standard based on area market rents for comparable units.
The difference between a certificate and a voucher is the rent level of a qualified unit. Certificates, common in early years of the Section 8 program, require the unit's rent to be at or below the published standard for that type of unit. With vouchers, the rent may be any level, but the resident is responsible for any additional rent above the published standard. Thus, with a voucher, it is possible for a resident to pay more than 30 percent of income in rent. The advantage to a voucher, however, is that the household has a larger selection of apartments. Older households hold about 15 percent of the 1.4 million certificates and vouchers.
- PPI analysis of HUD's American Housing Survey.
- Housing costs include rent, utilities and renters insurance (if any).
Written by Andrew Kochera, AARP Public Policy Institute
May be copied only for noncommercial purposes and with attribution; permission required for all other purposes.
Public Policy Institute, AARP, 601 E Street, NW, Washington, DC 20049
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