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The housing challenges of U.S economy – Are we really independent?


We are at the threshold of celebrating the 238th Independence day on 4th of July, 2014. Like many other fellow Americans, we will remember the sacrifice & honor of our beloved leaders/soldiers who devoted their lives for us. They not only fought for our present but also for our better living, better food & shelter in future. To be called a truly independent U.S citizen, we should also work on those causes which will secure our children's future life. Housing problem is the most important amongst those causes. So, in this 4th of July, let us know about the key challenges we are facing about affordable housing & community development as an U.S citizen.

The “Housing Challenges” may be divided in following manner:

1) Affordable rental housing – It is the most important housing challenge we are encountering since last decade. It has become impossible for the people to afford a rental home because of the recession-affected unemployment & foreclosure. These two aspects fueled up the demand for rental housing units amongst the homeowners who shifted to rental houses. Rental-home affordability is measured by rent-to-income ratio. Generally 30% of the total income is considered as rent payable by households. Low-income households often get affected from lack of other basic affordable services & commodities due to rent burden. According to HUD's report in 2009, 7.1 million people (6% of the total U.S households) suffered from low income which was half of their monthly earnings. They have paid more than half of their earnings towards rent in absence of any government aid. Rental housing units that existed since 1999 have been demolished or lost nearly about 12% or more.. Lack of infrastructure & investments in low-cost housing is also a barrier.

Resolution so far - Housing subsidies are available to only between 6 to 7 million renters which is not sufficient with the growth rate of homeless people. Few housing programs like the Low Income Housing Tax Credit (LIHTC), Public Housing program and Section 8 have encouraged the construction of many housing units. The most helpful program which provides subsidies to the tenants directly is called “Housing Choice Voucher program”. All of the above programs, except LIHTC, are administered by the U.S. Department of Housing and Urban Development (HUD). For the senior citizens, housing programs & subsidies are available through HUD, Area Agencies on Aging (AAA) , Community Development Block Grants & reverse mortgage.

2) Affordability of homeownership - The homeownership rate in U.S was increased significantly during 1949 to 1960. After the World War II , the homeownership rise was handled by two authorities, named - Federal Housing Administration (FHA) & Federal National Mortgage Association (FNMA). The Veterans Administration (VA) also played a important role in reducing monthly payments as well as the initial down payment. Unfortunately, White-American are getting much more benefits than the Afro-American residents & Hispanics. Several factors affected minorities in case of homeownership like discrimination, low income and family wealth, illiteracy about homeownership and development oriented regulations etc.

Resolution so far – Private, public & shared equity sectors have started some key instruments like - automated underwriting , secondary mortgage institutions , private mortgage insurance, mortgage revenue bonds (MRBs) & Mortgage Credit Certificates (MCCs).

3)Response & recovery from foreclosure – In case of foreclosure, both homeowner & renter get affected heavily. Many renters become homeless when their landlords file for foreclosure mostly in low-income minor locality. More than 1/4 of total residential properties with a mortgage are in foreclosure or are at risk. Presently programs such as Home Affordable Modification Program (HAMP) proved much helpful in these cases.

4) Discrimination in housing – Discrimination in rental or sale markets have a bad affect in housing industry. In 1962, President J.F.Kennedy authorized Executive Order 11063. As per that order , housing discrimination is barred in federally assisted housing. In private housing, racial discrimination was legally active until the Fair Housing Act in 1968. According to the act, there are several restrictions about discrimination in housing based on race, religion, color, sex, national origin, handicap, and familial status. Local & State laws have also ensured the rights of citizens to be treated equally in case of renting, sale and financing of housing. Even though those laws are still active, racial assignment are still rampant & lawsuits are filed against public housing authorities in this regard.

5) Homelessness – Lack of affordable housing & extreme poverty causes homelessness. Approximately 75% of the households are below or at poverty line in U.S. Unexpected incidents like illness or job loss can unstable their housing status. The particular challenge today we are facing is the increasing number of homelessness between families caused by the recession and job loss or the loss of homes due to foreclosure.

Resolution so far - The Stewart B. McKinney Homeless Assistance Act of 1987 (renamed the McKinney-Vento Act in 2010) was a relief for the homeless people. Another programs notably Emergency Shelter Grants (ESG), Single Room Occupancy programs, Shelter Plus Care & Supportive Housing programs helped in health, education, medical treatment & many other issues.

6) Distressed Neighborhood – Presently construction of subsidized, private & public housing is often affected due to distressed neighborhood. It is because large number of low-income people are relocating in very small spaces instead of broader & affordable housing. May be the single most widely used sign of distress is high neighborhood poverty level. High-level poverty neighborhoods have been indexed for low-job opportunities and mass education , causing increasing crime and disinvestment. As per recent stats, 1 in every 11 U.S citizens lives in a neighborhood where 30% of the people lives under poverty level. Foreclosure rate in high-poverty areas are also getting higher.

Resolution so far – National & local foundations have initiated strategies for minorities & low-income people like Philanthropic program. Other useful programs like Community Reinvestment Act (CRA) , Neighborhood Stabilization Program, Neighborhood Revitalization Initiative (NRI), HOPE VI & Affordable housing investment programs supports the poverty affected areas In different states.

7) Energy efficient housing – Cost of energy is a important factor which is affecting the housing market in U.S. Higher utility cost makes the homes unaffordable for new home buyers in private as well as public housing. Low-income people have low purchase power parity(PPP) which is a big drawback in current housing industry. Short term energy costs often considered as an obstacle for future saving to homeowners & renters. Housing cost & transportation costs are two of the most major parts of housing budget. Cost of land which depends on the distance from workplace is less, but transportation costs are comparatively quite high.

Resolution so far – Private sectors are reducing up-front costs of maintenance. Private non-profit organizations like CDCs (community development corporations) have taken a step to reduce household's costs and energy consumption by means of home weatherization projects and other low-budget plans. FANNIE MAE also taken needed steps to initiate location efficient mortgages (LEMs) & also many other mortgage plans to help low-income households. The FHA introduced energy-efficient mortgages which helped the homeowners & buyers to manage the cost of energy oriented improvements through mortgage loan. Federal policies also helps side-by-side to lower energy costs such as “Energy policy act 2005”, awarding points for energy saving, training (Energy Star program in 1992) and many other activities.

The improvements of U.S housing industry is majorly depends upon the upcoming federal policies & Acts. We can hope the situation will be better in future in terms of a good, affordable shelter for every U.S citizen.

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