Our Response to the Housing Crisis Must Include Rental Assistance, Not Just More Supply

In a Congress struggling to define its role during a time of political and economic upheaval, there is at least one area of broad agreement: lawmakers need to address the nation’s ever-worsening crisis in housing affordability. The most prominent proposals on Capitol Hill thus far aim to address the shortfall in housing stock, which makes sense, given the role that has played in driving up rents and home prices. What has been left out of the discussion, however, is the need to expand rental assistance to help the millions of people who will still pay very high shares of their income for rent, even if we build enough homes to address the supply shortfall.

The depth and scope of the nation’s housing affordability crisis is remarkable. Over the last five years, home prices across the nation have risen by 50 percent and rents by more than 20 percent, with housing costs doubling in communities where the cost of insurance has also spiked. No longer contained to the coasts, this dramatic rise in the cost of housing is impacting families who rent and who own; families in urban areas and those in rural areas; and families already struggling to get by and those well into the middle class. Growth in housing costs has moderated some since the peak of this surge, but rents and housing-related costs remain high around the country.

As a result, housing policy has received an unprecedented level of attention at the federal, state, and local level. But by focusing almost entirely on the housing shortfall, we have largely ignored those with the lowest incomes and the deepest housing needs.

In 2023, 7 million households with incomes below the poverty line paid more than half their income for rent. On average those households had just $748 a month in income, meaning that to reduce their rent to 30 percent of their income — the upper limit at which most economists consider rent affordable — they would need to pay no more than $224 a month. Unfortunately, that’s less than half of what a landlord would need just to cover the average cost of operating and maintaining a typical rental unit, not to mention the cost of building the unit or any profit.

No matter how many units are built or how much policymakers subsidize construction costs, increasing supply alone will not make housing affordable to families at this income level.

To make up the considerable difference between what families and individuals at the lower end of the economic spectrum can afford and what makes economic sense for builders to build, some will need help to pay the rent. Not surprisingly, one study after another has shown that rental assistance is highly effective at cutting homelessness, evictions, and overcrowding. We have managed to cut veteran homelessness in half since 2010 largely through a significant increase in rental assistance. Rental assistance can also give families more choices of neighborhoods and greater access to higher income communities.

For all of the data showing how effective it has been, however, we continue to provide rental assistance to only a small fraction of those who need it.

Only 1 in 4 households that qualifies for federal rental assistance receives it, leaving the other 3 in 4 households at the mercy of a market that simply can’t serve them. Millions of families are thus falling into the gap between what the market can do and what the government has been willing to do.

Families facing unaffordable rents are compelled to divert money from other basic needs, like food and medicine. They are often one setback — car troubles or reduced work hours— away from eviction. The latest count found that in January 2024, more than 770,000 people couldn’t afford homes at all — an all-time high — forcing them to live in shelters, tents, cars, and other unsafe and unstable situations.

Addressing this shortfall will require a major increase in funding for rental assistance. Closing it entirely is estimated to cost around $118 billion a year, but Congress could start incrementally by prioritizing people with the lowest incomes, who are most likely to experience homelessness without rental assistance. While the sum needed to help even this group is no doubt significant, allowing the need for rental assistance to go unfilled is not free. We are paying a heavy economic and social cost as more and more families face eviction, overcrowding, and homelessness, making it harder for them to get health care, earn a living, and give their children the opportunities they need to succeed.

The rising interest in the housing affordability crisis is certainly welcome, and if we are to address it, we must address the supply shortfall. But that alone isn’t enough. We need to provide rental assistance to more of the millions of families who qualify but continue to go without the help, because without it, they will continue to suffer through a crisis in housing affordability, even if we build all the housing we need.

Jim Parrott is a nonresident fellow at the Urban Institute.