May 17, 2017 Housing Sector Overview Housing Finance Policy Center May 17, 2017
AFFORDABLE HOUSING: In general, housing for which the occupant(s) is/are paying no more than 30 percent of his or her income for gross housing costs, including utilities. Some jurisdictions may define affordable housing based on other, locally determined criteria, and that this definition is intended solely as an approximate guideline or general rule of thumb. (HUD)
Key drivers of decreased affordability Housing supply lagging demand Home price appreciation Rising interest rates Low or stagnant wages and supply constraints High rents and cost burdened renters Incomes not keeping pace with rising housing costs
As the demand for affordable housing increases, affordability challenges compound
Rental share has increased over time Number of Net New Households Millions of households 16 14 Renters Homeowners 12 10 8 6 4 2 27.5% 72.4% 45.1% 54.9% 45.1% 108.5% Households Owners Renters Percent change, 1990-2000 14.94% 16.59% 11.84% Percent change, 2000-2010 10.65% 8.84% 14.20% Percent change, 2010-2015 3.18% -0.41% 9.97% 0-2 1990-2000 2000-2010 2010-2015 Sources: U.S. Census 1990, 2000, 2010, American Community Survey, 2010, 2015, and Urban Institute calculations 5
Housing demand is growing faster than supply Supply and Demand for Housing Number of units (thousands) Housing Supply 2-yr Average Demand 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Difference Between Housing Supply and Housing Demand Number of units (thousands) 1,200 1,000 800 600 400 200 0-200 -400-600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: US Census data, Urban Institute Calculations 7
Net growth in rental units is concentrated in the highest-rent structures Percent change in number of units (2007-2015) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Single-Family 2-4 Units 5-19 Units 20-49 Units 50+ Units Manufactured Housing Average rent ($ per month): 1024 825 865 966 1023 662 Source: American Housing Survey, Urban Institute calculations 8
Cost burdens are high
Real incomes are flat Median Household Income, Real 2014 $ in Thousands, by Age of Householder $90,000 All 15-24 25-34 35-44 45-54 55-64 65+ $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Sources: U.S. Census Bureau Current Population Survey and Urban Institute. 9
Rents are growing faster than incomes Median Rent vs. Household Income, 1988-2015 Nominal dollars, indexed to 100 260 Median Rent, SA and Indexed Median Household Income, Indexed 240 220 200 180 160 140 120 100 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Sources: U.S. Census Bureau Housing Vacancy Survey, U.S. Census Bureau Current Population Survey (CPS), and Urban Institute calculations. 10
A quarter of renters and 10% of owners spend over half their incomes on housing Most of the burden falls on those earning less than 30% of area median income ( extremely low income ) Cost burdened renters, 2015 Cost burdened owners, 2015 Housing units (millions) 14 Severely cost-burdened Moderately Cost-burdened Not cost-burdened 35 Severely cost-burdened Moderately Cost-burdened Not cost-burdened 12 30 10 25 8 20 6 15 4 10 2 5 0 Extremely low (0-30% AMI) Very low (31-50% ) Low (51-80%) Middle (81-120%) High (Over 120%) 0 Extremely low (0-30% AMI) Very low (31-50% ) Low (51-80%) Middle (81-120%) High (Over 120%) Source: Urban Institute tabulations of American Community Survey data. 11
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Housing finance system has been evolving since 2008
Housing Finance Options Government Federal Housing Administration (FHA) Veterans Administration (VA) Veteran Affairs Supportive Housing Vouchers Rural Housing (USDA) USDA Rural Rental Housing Programs Ginnie Mae securitization of above government loans Conventional Government Sponsored Enterprises Fannie Mae and Freddie Mac National Housing Trust Fund and Duty to Serve programs Federal Home Loan Banks Bank/Private Investor Portfolio Lending Private
Public Housing and Rental Assistance options can t meet growing need
Public Housing and Rental Assistance Low Income Housing Tax Credit (LIHTC): Administered locally by the IRS Finances the construction, rehabilitation, and preservation of housing affordable to lower income households. Housing Choice Vouchers: assists 2.2 million households HUD s largest rental assistance program, which pays landlords the difference between what a household can afford to pay and the rent itself. Other vouchers: Family Unification Program, Project- Based Vouchers, and Tenant Protection Vouchers Public Housing: HUD serves 1.1 million households, and 2.6 million residents Housing units serve residents who have income less than 80% of AMI, with at least 40% of new admissions having extremely low income (less than 30% AMI) Project-Based Rental Assistance: Serves 1.5 million households HUD has provided private owners of multifamily housing either a long-term project-based rental assistance contract, a subsidized mortgage, or in some cases both, to make units affordable. Programs to address disabilities, aging, and homelessness Supportive Housing for the Elderly, Supportive Housing for Persons with Disabilities, McKinney- Vento Homeless Assistance Programs
Sources of financing for all borrowers First Lien Origination Volume ($ trillions) GSE securitization FHA/VA securitization PLS securitization Portfolio $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.639 $0.009 $0.47 $0.5 $0.95 $0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sources: Inside Mortgage Finance and Urban Institute.
Financing for first-time homebuyers 80% First Time Homebuyer Share: Purchase Only Loans Freddie Fannie Ginnie All 70% 70% 60% 53% 50% 42% 40% 37% 30% 20% Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Sources: embs and Urban Institute.
Access to credit is dwindling for more vulnerable populations
The share of borrowers with strong credit has increased dramatically FICO Score Distribution of New-Purchase Borrowers a.<660 b.660-700 c.>700 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: HMDA, CoreLogic, embs, and the Urban Institute.
1.1 million missing loans in 2015 Cumulative missing loans, 2009-2015: 6.3 million 5
And wealth building opportunity through homeownership is shrinking across age and racial groups
Homeownership rates declined for most age groups Homeownership Rates by Householder Age Percent of all households 90% 1990 2000 2010 2015 80% 70% 60% 50% 40% 30% 20% 10% 0% 25-34 45-54 65-74 Total Sources: US Census 1990, 2000, 2010; American Community Survey 2015. 5
By the 2020s, minorities will account for all growth in homeownership 60% Percent change in homeowners by race/ethnicity 50% 40% 30% 20% 10% 0% White Hispanic Other Black White Hispanic Other Black White Hispanic Other Black White Hispanic Other Black -10% 1990 2000 2000 10 2010 20 2020 30 Source: U.S. Census 1990-2010, Urban Institute projections. 24
And people are missing out on wealth-building opportunity Net Worth by Race 300,000 270,500 250,000 231,000 200,000 195,000 2013 dollars 150,000 100,000 79,970 90,250 50,000 0 Owners 8,201 5,400 1,100 Renters 5,070 11,600 White Non-White Black Hispanic Other Source: Joint Center for Housing Studies tabulations of Federal Reserve Board, Survey of Consumer Finance, 2014 12