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Housing Affordability and Policy Solutions
The US is currently facing an affordable housing crisis. According to the US Department of Housing and Urban Development (HUD), the nation has approximately three million fewer affordable housing units for low-income people than are needed to house them. In 2008 there were only 61 affordable units for every 100 people with extremely low incomes (up from 40 in 2005). However, approximately half of those units are not available to the lowest-income renters because they are occupied by higher-income renters or are being held vacant. This means approximately 9.2 million of the lowest-income renters are competing for only 3.4 million affordable and available rental units. This severe shortage is a significant problem for older people, since approximately 32 percent of renters over 65 years old live in poverty.
The severe shortage of affordable housing negatively impacts millions of Americans who suffer from homelessness, live in overcrowded and substandard housing units, or are faced with high housing costs that exceed 30 percent of their incomes. The collapse of the housing market and sharp increase in foreclosures has also had a devastating impact on older people. The public perception is that older Americans are financially secure in their homes, but hundreds of thousands are not and face uncertainty over their futures as homeowners.
The declining availability and affordability of private-market housing and the rising cost-to-income ratios for housing have increased the importance of federally subsidized housing for older renters with low incomes. However, housing assistance has represented a small and shrinking share of the federal budget. Finding housing, even with a rental subsidy, can be difficult, particularly in tight rental markets. The supply of affordable housing, already limited, is further reduced by landlords’ unwillingness to rent to those with Section 8 vouchers. The availability of suitable affordable housing is further limited for those who have disabilities.
In recent years challenges to providing federally assisted affordable housing occur as a result of reductions in congressional appropriations. In many markets where housing costs rise faster than inflation, the effect of decreased federal appropriations can be a reduction of the number of affordable units and/or a shift of assistance away from renters with low incomes.
The Housing and Economic Recovery Act of 2008 (HERA) and the American Recovery and Reinvestment Act of 2009 (ARRA) provided several new tools to help mitigate the foreclosure crisis and increase housing affordability, including creating a new national housing trust fund; a new neighborhood stabilization program; modifications to the Home Equity Conversion Mortgage reverse mortgage loan requirements, the Low-Income Housing Tax Credit, and the Federal Housing Administration (FHA) loan programs; prohibitions on seller-funded down payments creating an FHA foreclosure rescue program (called Hope for Homeowners) and a first-time homebuyer’s tax credit and other provisions. Billions of dollars were provided in funding for the Public Housing Capital Fund, the HOME program to complete stalled Low-Income Housing Tax Credit projects, Rural Housing Direct loans, the HUD Energy Efficiency Program and other programs. Together, these changes and new programs were intended to address several of the effects of the housing crisis and provide options for states and localities to promote affordable housing. As the financial and housing crisis evolved, results have been mixed: Fannie Mae and Freddie Mac were placed under the conservatorship of the Federal Housing Finance Agency and the expected contributions to the National Housing Trust Fund were suspended and other programs have had varying impacts for homeowners and the housing market.
Section 202 Supportive Housing for the Elderly Program
The Section 202 Supportive Housing for the Elderly Program is the principal federally funded construction program for housing designed specifically for people age 62 and older. Having placed residents in more than 300,000 units, the program has played a key role in expanding the range of housing choices available to older people. Section 202 housing provides an important source of housing for low-income older adults across a wide range of abilities and needs, simultaneously serving both frail and nonfrail populations in an integrated community. For example, some Section 202 facilities are being converted into assisted living facilities to help serve increasingly frail residents.
Though Section 202 is reaching older adults in need, the program faces several challenges, including funding reductions, high demand for housing, project development delays, and outdated facilities, among others. The availability of affordable housing units for older adults may be further reduced by the potential loss of older Section 202 projects as Section 8 project-based rental-assistance contracts—and the low-income-use restrictions attached to them—begin to expire.
Low-Income Housing Tax Credit Program
The federal Low-Income Housing Tax Credit (LIHTC), enacted as part of the Tax Reform Act of 1986, provides tax benefits for investing in the production of low-income rental units. Approximately 30 percent of the 23,000 LIHTC properties placed into service between 1987 and 2006 were intended primarily for older people. Tax credits may be used only for residential rental properties and in some cases used for assisted living residence without frequent nursing services available to residents. Given that 38 percent of the older people in tax credit properties intended primarily for older adults were frail or disabled, a significant resident population may have difficulty aging in place in these facilities and could benefit from supportive services. While housing projects that provided services are eligible for the LIHTC, their costs must be covered by the gross rent, which may push the rent over the allowable rate for subsidized housing. As such, resident services may not be financially feasible if costs are too high.
While its implementation and execution have been successful, there are some areas of difficulties with the LIHTC program. There is a high demand for units in tax credit properties, as demonstrated by long waiting lists and vacancy rates substantially lower than the national average for all rental units.
Prior to the economic crisis of 2007 and 2008, demand for tax credits was high, but the struggling economy has meant that fewer investors need tax credit investments. LIHTC has been a major source of funds for construction of new affordable housing units, but lower usage of tax credits will negatively impact the overall production of units.
Preservation of Subsidized Housing
Older Americans are particularly vulnerable to rising rental costs. According to the Harvard Joint Center for Housing Studies, nearly 2.5 million senior renters, or 53 percent of all seniors who rent, are paying more than they can afford for housing. In addition, 1.4 million senior renters are paying more than 50 percent of their income on housing costs and meet the definition of “severely cost burdened.” Moreover, current production of affordable housing is unable to keep pace with growing demand. Therefore federal government programs such as project-based Section 8, Section 202 Housing for the Elderly, and Section 811 Housing for Persons with Disabilities are crucial funding sources for subsidized housing.
Many affordable housing units are threatened due to rising property values that give landlords incentive to opt out of the affordable housing market as their contracts expire and to charge the highest market rents or sell their buildings. Lower-income older people need housing options in areas that are close to transit, shopping, and other community resources.
Rental-assistance contracts—Rental assistance contracts provide funding to cover the costs for operating HUD-approved housing and to help tenants cover the difference between their contribution and the cost of rent. Residents living at facilities funded under Section 8 rental-assistance contracts (46 percent of whose families are headed by people age 62 and older) and those living in the former Section 221(d)(3) Below Market Interest Rate projects and Section 236 projects (approximately 30 percent of whose families are headed by people age 62 and older) could be at risk of losing their homes if these contracts expire.
Mark-to-market program—Projects with rents above the prevailing market level in their area may also disappear from the housing stock. Though less common, these projects are expensive for HUD to support. The mark-to-market program, established in 1997, reduces and restructures debt for these projects and renews Section 8 assistance at lower rent levels. Although HUD takes a one-time capital loss from the debt restructuring, the agency subsequently saves money through the lower rent subsidy. But in the course of the program, some residents may be displaced if the landlord declines to participate.
HOPE VI program—Affordable public housing is also at risk. Since 1993 the HOPE VI program has helped public housing authorities modernize their units. In many cases this has meant demolishing and replacing public housing with mixed-use, mixed-income housing. Although many public housing authorities have used HOPE VI grants to provide affordable supportive housing solutions for older Americans, the program can cause displacement, and there is no requirement that units be replaced one for one. A new initiative “Choice Neighborhoods,” is designed to create housing and livable communities from distressed neighborhoods and requires one-for-one replacement.
Rural Housing Programs
The Department of Agriculture has several programs that impact housing in rural areas. The Rural Housing Service (RHS) Section 515 program provides low-interest loans to fund the construction of apartments for low-income renters in rural areas. Section 515 units serve an extremely low-income population in need of affordable housing. A 2004 RHS report found that there were 434,296 Section 515 units in nearly 16,000 properties with an average property age of 23 years and that 58 percent of tenants were age 62 and older and/or disabled. Although many of these older people will require personal care services, physically frail or cognitively impaired Section 515 residents cannot receive supportive services from the housing provider as RHS rules require residents to be fully independent.
The Section 515 program has undergone severe cuts since the mid-1980s. Much of the existing affordable Section 515 stock is at risk of being lost, as assistance contracts expire and owners convert their units to market rates. To address the aging Section 515 portfolio and the loss of units, RHS recommended implementing strategies such as: tenant protections through housing vouchers to help tenants remain in place or seek new housing elsewhere when the property they live in leaves the program, and housing-revitalization scenarios. However, there are concerns that revitalization might eliminate the existing policy under the Emergency Low-Income Housing Preservation Act that keeps older properties in the program or that tenants would not receive sufficient assistance when properties leave the program.
The RHS Section 504 program provides home-repair assistance to homeowners in rural areas. It has had four times as many eligible applicants as funds available. Among all homes with moderate or severe physical problems occupied by older households in 2005, 30 percent were located in rural areas.
Manufactured housing provides a major source of unsubsidized housing for low- and moderate-income households. In 2009 there were almost 8.8 million manufactured homes occupied as a primary residence, of which 2.7 million were owned or rented by someone age 55 or older. In addition, there were approximately one million manufactured homes held as vacation or second homes, of which two-thirds were owned by someone age 50 or older. Manufactured housing plays a critical role in serving the housing needs of older Americans who might otherwise find it difficult to live affordably. AARP estimates that the median income of households headed by someone age 50 or older living in manufactured housing in 2005 was approximately $22,000, compared with about $44,000 for residents 50 and older in conventional single-family housing. Although about 60 percent of residents 50 and older living in a manufactured home are considered low incomes, they typically receive no direct housing subsidy. Affordability for residents is complicated by the financing, utilities, maintenance, and repair costs of such housing. Improvements to the Manufactured Housing Construction and Safety Standards can go a long way toward reducing maintenance and repair costs.
Reforms—The 1994 National Commission on Manufactured Housing made recommendations on modernizing the National Manufactured Housing Construction and Safety Standards Act of 1974. Their recommendations included creating a committee to updated construction and safety standards, developing an expedited standards adoption process, and enacting a federal requirement for a manufacturer’s warranty. Although the committee was created, other efforts to enact reforms have not been as successful.
Handling consumer complaints— Though states can create agencies to enforce manufactured homes, many lack adequate oversight. Landlord-tenant issues have become particularly important in many communities where low vacancy rates, a diminishing supply of lots (known as a closed park situation), and rent increases make it difficult to place a manufactured home. As a response AARP sponsored the development of a model statute by the National Consumer Law Center, known as the Manufactured Homeowner’s Bill of Rights, which covers a variety of issues, including rents, tenant rights, and park conversions.
Issues facing owners of manufactured housing units—Owners of manufactured housing face several issues that differ from conventional, “stick-built” housing owners. These include: owning the unit but possibly not the underlying land; their tenure being threatened if the land is sold or changes uses; in states with minimal protections residents may fear retaliation from park owners for attempting to form resident associations; park owners can deny a potential buyer the right to keep a home in location; and a lack of protections that can limit the ability of unit owners to exercise control over their homes. Additionally, manufactured homes built prior to the development of national construction and safety standards are generally considered to be substandard and can have energy efficiency and safety issues.
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