Working families have been hit especially hard by the recent economic crisis. A growing number of moderate-income households, those earning between 50% to 80% of the Housing and Urban Development (HUD) area median income (AMI),[1] have joined millions of low income households already struggling with high housing costs that swallow much of their income.

For millions of Americans, the COVID-19 crisis has taken away the stable income they’ve relied upon.
— Emily Cadik, executive director of the Affordable Housing Tax Credit Coalition

To help these moderate-income families in the long term, housing advocates call for policies that encourage new construction of affordable housing—both rental apartments and for-sale homes. In the short term, advocates want to see emergency aid to households under pressure.

“Without the enactment of federal policy solutions, millions will face dangerous trade-offs between paying rent and paying for their other needs like groceries, prescriptions, car payments, and utilities,” says Cadik.

Households Burdened by Heavy Housing Costs

Even before the COVID-19 crisis, nearly 11 million households were spending more than half of their income on rent, according to The State of the Nation’s Housing, 2019,[2] published by Harvard University’s Joint Center for Housing Studies. And in the first months of the crisis, 8.9 million households had at least one member of the household lose their job, according to the Urban Institute.[3]

Those job losses have hurt families up and down the income spectrum, including moderate-income households. Nearly two-thirds (60.6%) of households earning between 50% to 80% of the AMI paid more than 30% of their income on rent, according to the Urban Institute. That percentage is up from 52.2% before the crisis.

More than a quarter (25.8%) of households earning between 100% and 150% of the AMI paid more than 30% of their income on rent, according to the Urban Institute. That percentage is up from just 10.7% before the crisis. These housing costs are an especially heavy burden in the most expensive housing markets.

“Rent burden increased the most for renter households making above 100% of the AMI, while rent burden remains fairly stable, albeit extremely high, for households making below 50% of the AMI,” according to the Urban Institute.

The Missing Middle

Homes built with federal low-income housing tax credits (LIHTCs) are typically affordable to households earning less than 60% of the AMI. New developments that are built without government subsidies are generally priced to sell or rent as upper-end market-rate housing.

The space in the housing market for homes that are affordable to people earning between 80% to 120% of the AMI is often referred to as 'the missing middle'.
— David Dworkin, president and CEO of the National Housing Conference

If they earn more than 60% of the AMI, these working families typically earn too much to live in apartments subsidized by LIHTCs. “They may have good jobs, earning decent money, but they aren’t earning enough to afford homes in their areas, but they earn too much to qualify for subsidy programs,” says Dworkin.

Advocates Call for Policies

The government could encourage the production of new, for-sale homes through programs like down-payment assistance and homebuyer tax credits, says Dworkin. He points out that there are 1.7 million “mortgage ready” African-American millennials with solid credit scores and more than $100,000 in annual income. “Homes affordable to them might not be on the market,” he says. “Home builders could play a bigger role in the recovery from the pandemic’s recession.”

Advocates also call for increased funding for the LIHTC program, in addition to a fixed rate for the 4% LIHTC program, which finances roughly half of housing credit properties and has been hurt by the fall in benchmark interest rates.

In the short-term, many working families may lose the support of programs like enhanced unemployment benefits at the end of July. Without these benefits, it would take $5.5 billion a month in rental assistance just to make sure renter households won’t be more burdened by housing costs than they were before the crisis, according to Cadik.

“While many may be able to pay rent right now due to expanded unemployment benefits… they are likely to face severe housing instability once the additional unemployment payments and state unemployment extensions expire,” says Cadik.