New Harvard Housing Study Highlights Affordability Challenges Amidst Post-Pandemic Economic Recovery
On June 16, Harvard University’s Joint Center for Housing Studies (JCHS) released its 2021 State of the Nation’s Housing report. The report finds that, as the economy recovers from the impact of the COVID-19 pandemic, some households are taking advantage of historically low interest rates to purchase homes with savings built during the health crisis, while others have been locked out of opportunities to own as prices increase to meet demand. Moreover, renters and homeowners are grappling with billions of dollars in back rent owed, unpaid mortgages, and the growing risk of eviction and foreclosure.
Increases in Home Prices and Tight Supply
Before the pandemic, household growth in the suburbs and small metros was on the rise. JCHS attributes continued growth in this trend to the pandemic, particularly among younger households eager to own homes and looking for more space to work remotely. Sales of existing homes were up 20 percent year over year on average from September 2020 through February 2021. Historically low interest rates and rapidly rising prices have in turn given a substantial boost to new residential construction. The home-buying binge occurred despite historically tight supply; in late 2020, the months of supply for existing homes dipped below two months for the first time ever, while the median time on the market hit a record low of 18 days. According to the Housing Vacancy Survey, the national homeownership rate stood at 65.6 percent in the first quarter of 2021, a 0.3 percentage point increase from a year earlier as seen in Figure 18.
Racial Inequities in Homeownership
JCHS notes that, while the national homeownership rate remains on an upward trajectory, disparities amplified by the COVID-19 pandemic between households of color and white households remain front and center. Those include shortages of housing near jobs, affordable housing, and starter homes and widening racial inequalities around ownership, access, and wealth. According to the JCHS report, in the first quarter of 2021, the persons of color–white homeownership gap was 28.1 percent, an improvement from the record high of 30.8 percent in 2019 but still large by historical standards. Income inequality contributes to the disparities in homeownership, with the median income of white households ($71,000) some 65 percent higher than Black households ($43,000) and nearly 30 percent higher than Hispanic ($55,000) households.
Households Face Risk of Eviction and Foreclosure
With so many renters and homeowners in financial distress, there are growing concerns among affordable housing advocates about an impending wave of evictions and foreclosures. So far, substantial federal relief through stimulus payments, expanded unemployment benefits, and other funding, along with federal and state eviction moratoriums, has prevented large-scale displacement.
The report found that, as a result of widespread income losses during the pandemic, 14 percent of all renter households were behind on their housing payments in early 2021, and in 10 states, more than one-fifth of renters were in arrears.
The report notes most of the 7.1 million loans that entered forbearance had left that status as of March 2021. However, some 2.3 million homeowners were still in active forbearance in early 2021. Homeowners in these circumstances were more likely to be households of color and/or have little equity in their homes as seen in Figure 21. A recent report by the Consumer Financial Protection Bureau found that 9.2 percent of Black and 8.4 percent of Hispanic mortgage holders were in forbearance in March 2021, considerably higher than the 3.7 percent share of white mortgage holders.
The Number of Cost-Burdened Households on the Rise
The report shows housing costs are particularly burdensome for the lowest-income renters. The pandemic has left millions of households deeper in financial distress. Low-income households especially are likely to have lost wages and fallen behind on housing payments. While housing subsidies offer much-needed support, only a quarter of eligible households receive assistance, and the assistance does not begin to address long-standing housing affordability issues.
According to the JCHS report, more than 80 percent of renters earning less than $25,000 were cost-burdened in 2019 — spending more than 30 percent of their income on housing, and the majority spent more than half their income on housing. Similarly, the report found that 70 percent of renter households earning between $25,000 and $34,999 and nearly 50 percent of renters earning between $35,000 and $49,999 were cost-burdened in 2019, with Black and Hispanic renters 12 percent and 10 percent more likely, respectively, to carry such burdens.