Affordable Housing: A Crisis Decades in the Making


There is much debate about the reasons for the affordable housing crisis in America, but one thing is certain: lack of supply figures prominently.

From 2015 to 2020, long before interest rates spiked, the U.S. lost 4.7 million apartment units with rents less than $1,000 per month, according to a joint study commissioned by the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA). The housing organization, Up for Growth, estimates a current shortage of about 3.8 million homes across the U.S. The National Association of Realtors is also sounding the alarm, estimating that we have underbuilt housing over the past two decades by 6.8 million units. There is not one state in the union that has an adequate supply of affordable rental housing; the absolute shortage ranges from 10,215 rental homes in Wyoming to nearly 1 million in California.

apartment units lost and home shortage

We’re seeing the impact. Families don’t have access to quality, affordable housing near their place of work or children’s schools. According to the U.S. Census Bureau, over 10 million low-income renter households (25 percent of all renters) are severely cost-burdened, meaning they spend over 50 percent of their monthly income on rent. That leaves them with little income to care for all their other living expenses, including food, clothing, healthcare, and childcare.

A Decades-Long Struggle to Provide Affordable Housing

The housing supply crisis is not a new phenomenon. The U.S. Housing Act of 1937 was enacted to provide low-income people with quality, affordable places to live through public housing. Since then, many government programs and privately funded programs have tried to tackle the issue.

Notably, HUD was created in the late 1960s as part of the Great Society Program, a set of initiatives intended to reduce poverty, mitigate crime, and improve the environment. The intention of HUD was to focus on building more housing supply. Section 8, the largest subsidized housing program in the U.S., was created in the 1970s and yielded significant production, along with other HUD production programs like Section 232, 236 and 221d(4). In the 1970s, the federal government was financing over 270,000 units of affordable housing.

Progress was being made, but in the 1980s, changes in the economy, the deinstitutionalization of people with mental illnesses, and a general decline in support for low-income families resulted in the explosion of homelessness in America. Additionally, since the 1980s, home prices have soared, while wages have not kept up with the cost of living. Currently, there is no state in the U.S. where someone earning minimum wage is able to afford rent on a two-bedroom apartment. Transitional and affordable housing simply did not materialize at a time when it was desperately needed. Adding to the crisis, there were also significant cuts in HUD’s budget during the early 1980s.

Average rent 2006-2024

The Tax Reform Act of 1986 created the Low-Income Housing Tax Credit program, commonly known as LIHTC. LIHTC is the largest federal program targeting the creation of affordable housing, and it finances approximately 100,000 units per year.

In recent years, investments in new affordable housing programs for the lowest income families have been mainly focused on the state and local level.

Affordable Housing Takes Another Hit: The Global Financial Crisis

During and shortly after the Global Financial Crisis (“GFC”) of 2007-2008, overall housing supply was constrained. Low-income people were still experiencing an affordable housing crisis in 2006, but for the majority of society, housing was relatively in balance. Homeownership was high, single-family housing was relatively affordable, and rental housing for moderate- and high-income people was still plentiful.

The GFC changed all that. Given significant dislocation in global capital markets, construction of single and multifamily properties came to a halt and didn’t resume dramatically for a number of years. When construction eventually did restart, developers were focused on building high-end properties or renovating class B-/C into B/B+. The unfortunate consequence was that affordable housing supply dwindled and then took another significant hit when COVID struck and slowed development for well over a year.

Where We Stand Today

Now we’re facing another crisis. The obstacles to creating new affordable and workforce housing units are multiplying. These include:

  • Limited supply of housing tax credits needed to build units that meet the affordable demand
  • Resistance to multifamily development from local communities, specifically affordable at local levels (also known as NIMBYISM, or a “Not-in-my-back-yard” perception)
  • Regulatory barriers to development
  • Rising construction costs due to inflation
  • Rising interest rates, reducing the amount of lending done for each affordable housing project

These obstacles have made development much more difficult.

The Joint Center for Housing Studies of Harvard University’s 2022 State of the Nation’s Housing Report observed: “Multiple interest rate hikes, on top of unprecedented price growth, have now made homes much less affordable in much of the country, especially for first-time buyers.” This environment creates an even greater need for affordable rental properties, which, in turn, puts upward pressure on rents at all income levels.

The Impact in Human Terms

Housing is one of the biggest “kitchen table” issues for American families. Its impact on quality of life and Americans’ ability to prosper and climb the economic ladder cannot be overstated.

Paying more for housing means that families have less income to cover food, gas, healthcare, and childcare, to name a few expenses – all of which have also drastically increased in price.

Most Americans are stretching more to live less comfortably. Consider these sobering statistics:

  • 72 percent of the nation’s 11.0 million extremely low-income renter households spend more than half of their incomes on rent and utilities.
  • Over 46 percent of renters spend more than 30 percent of their income on rent and utilities.
  • Over 25 percent of all renters spend a staggering 50 percent or more of their income on rent.
  • There are only 55 homes available for every 100 households making at 50 percent of Area Median Income (“AMI”).

What We’re Doing to Address the Affordable Housing Crisis

Walker & Dunlop has been a major player in the affordable housing space for years. In 2022, we were named the #1 Fannie Mae Lender, the #3 Fannie Mae Affordable Multifamily Housing Lender, and the #2 HUD Lender Overall. We have set a goal to originate $60B of affordable and workforce housing volume over the next five years – over the past two years, we have financed over $20B of affordable and workforce housing financing.

20b of affordable and workforce housing financing

We continue to invest in our platform so we can help solve the affordable housing crisis and provide our clients with unparalleled solutions for all of their affordable housing needs. For more information on Walker & Dunlop’s affordable housing platform, check out our website or reach out to a member of our team at [email protected] with questions.

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