Study Finds Economic Recovery Alone Does Not Solve the Shortage of Affordable Housing

A study by Jerry Anthony, “Economic Prosperity and Housing Affordability in the United States: Lessons from the Booming 1990s,” published in Housing Policy Debate explores whether economic growth improves housing affordability. His research finds that the economic prosperity of the 1990s did not reduce housing cost burdens, which suggests the market alone cannot solve the nation’s affordable housing problem without policy interventions.

Between 1990 and 2000, the nation’s unemployment rate declined from 5.7% to 4.0% and inflation-adjusted incomes increased by 5.7% for median-wage earners and by 11.7% for the lowest wage earners (bottom 10%). During the same period, the percentage of cost-burdened households, those paying more than 30% of their income for housing, remained constant at 30%. The prevalence of cost burdens among renters declined slightly from 41.7% to 40.4% and the prevalence among owners rose from 21.3% to 23.4%. Given the rising number of U.S. households, the number of cost-burdened renters increased from 9.0 to 9.8 million and cost-burdened owners increased from 6.1 million to 8.8 million during this period.

Of the 100 largest metropolitan statistical areas (MSAs), those with the highest median incomes (highest 25%) and those with the largest populations had a higher prevalence of cost burdens in 2000. MSAs with higher incomes may also have greater income disparities, making housing less affordable for those at the bottom of the income distribution. At the same time, MSAs with the highest poverty rates had a higher prevalence of cost burdens among renters but not owners. Not surprisingly, MSAs with the greatest population growth had greater cost burdens and those with the lowest net housing supply growth (housing growth minus population growth) had significantly higher prevalence of cost burdens among both homeowners and renters.

Dr. Anthony’s findings suggest that economic growth alone will not solve the lack of affordable housing in America. Even with economic growth, policy interventions are needed. Anthony’s recommendations include an increase in funding for federal low income rental housing programs, federal and state programs that can target housing resources to specific MSAs where they are most needed, and greater state and local efforts for affordable housing.

“Economic Prosperity and Housing Affordability in the United States” is available at: