Special Economy Matters Podcast on the Affordable Housing Crisis


This podcast was recorded to accompany the third installment of the Atlanta Fed's year-long series on economic mobility and resilience.

[Open with construction sounds at Habitat for Humanity's warehouse.]

Charles Davidson (voiceover): This is the sound of affordable housing being built inside a Habitat for Humanity warehouse in Atlanta. Habitat is one of the metro area's largest builders of affordable housing for single-family home buyers.

Dozens of volunteers are assembling the wooden skeletons of two houses for low- to moderate-income home buyers. One of the buyers is Lakeisha Merritt, a single mother of three who is helping build the home she and her two younger children will purchase.

Davidson: Do you mind if I ask what your living situation was like before this, and how big of a step this is going to be?

Lakeisha Merritt: This is the biggest step next to becoming a mom three times... 'Cause [with] renting, there were other people. Because I've rented and the people, my landlord, they went into foreclosure and I did not know it. So I was just kind of there and the sheriffs came and I found out then. That's not this time—that's two houses ago. So the next townhouse that I rented, it was horrific to say the least.

Davidson (voiceover): Merritt and her 6-year-old son and 18-year-old daughter recently moved in temporarily with Lakiesha's dad. They had moved from a rented townhouse where the basement flooded, the utility bills totaled several hundred dollars a month, and the electrical outlets routinely sparked and smoked. They had packages stolen from the front porch. All the while, Merritt was trying to stay in the same school district for her kids.

She was accepted into Habitat for Humanity's homeownership program in May of 2019. The program requires months of personal finance classes, work getting your credit in order, and additional steps. Once applicants like Merritt qualify, they get a mortgage loan from Habitat.

Merritt: It's been over a year, but it's been worth it.

Davidson: What does it feel like when you got approved, when you found that out?

Merritt: The best day ever.

Davidson (voiceover): Merritt works full-time as a billing specialist with a garage door installation company. As difficult as her journey to homeownership has been, there are plenty of others who have not found a stable home they can afford.

The Federal Reserve Bank of Atlanta's district includes Alabama, Florida, and Georgia, and parts of Louisiana, Mississippi, and Tennessee. Across those six states alone, there's a shortage of more than 1.2 million units of available and affordable housing for people who earn half or less of their area's median household income. That's according to research by the Atlanta Fed. That income figure equates to about $33,000 a year in most of the major metro areas in the Southeast.

The shortage of available, affordable housing has worsened since the Great Recession. Widespread foreclosures forced many homeowners into the rental market, so this surge in demand for apartments pushed rents higher. Each year, cities in the Southeast, including Atlanta and Nashville, have been losing more than a thousand houses or apartments that rent for $750 a month or less, according to research from Ann Carpenter, who is director of policy and analytics in the Atlanta Fed's Community and Economic Development Department.

Ann Carpenter: Well, there are a few factors at play certainly, and I think it begins with the shift of many homeowners to renters following the foreclosure crisis. Certainly a lot of people who couldn't afford their mortgage anymore or other conditions related to the recession left the homeownership kind of arena and became renters. At the same time, we've seen a lot of upward pressure on prices due to the high cost of land, the increasing cost of labor and other inputs to build housing, slowdown in the building of housing actually as a result of that partly.

And then we've also seen for some federal programs kind of a decline in levels of funding. So all of this has created... While demand for rental housing seems to be increasing and the numbers of rental households are increasing, the supply is not keeping pace. And the subsidies or the funding that's available to make housing more affordable, especially for low-income populations, are really not keeping pace as well.

Davidson (voiceover): Meanwhile, incomes have not kept up with rising housing costs, especially for low- and moderate-income households. In the bottom 25 percent of households ranked by earnings, real median income—that's adjusting for inflation—rose just 3 percent between 1988 and 2016. If incomes had simply kept up with the pace of economic growth over that period, incomes would have easily matched the rise in housing costs, according to the 2018 State of the Nation's Housing report from the Harvard Joint Center for Housing Studies. The center released that report in June at a conference here at the Atlanta Fed.

Davidson: Ann, what does this leave people to do? I mean if you're struggling to find a decent and stable place to live and stay in for a while—I know that's important. What do most folks end up doing?

Carpenter: That's a great question. What happens is a lot of people are pushed to the margins and that might mean that they're taking housing that is kind of substandard, that's maybe located in a place that's not convenient or not close to kind of access of areas of opportunity. They may be doubling up or tripling up, living with family members or friends, or living in their cars—we've seen a lot of cases of that across the country. And they're also more frequently subject to eviction. So when they're having a hard time maintaining payment of the rent, that can lead to an eviction, especially in states with fewer tenant protection laws, and that actually becomes a mark on your record that can make it even more difficult to access safe and affordable housing moving forward. And then homelessness is another kind of outcome that we're seeing across the country again.

Davidson (voiceover): Habitat for Humanity serves what its Atlanta president and CEO Lisa Gordon calls the missing middle. These are people who don't typically qualify for heavily subsidized housing but generally cannot pay for higher-end housing as the costs keep rising. These are mainly people making $24,000 to $50,000 a year, often working more than one job, and with generally one to four people in their household.

Davidson: What are the people you call the missing middle, what are they doing before they come to Habitat? Are they generally renting? What's their housing situation?

Lisa Gordon: We have a variety of people. Some people have been living with relatives, and/or paying these high rents. It varies, but you find them either in a high-rental situation or in rental conditions that are not optimal, meaning the condition of the house is not good, or they're living with relatives. And then very few people who've lost a job, or have had some kind of crisis in their family, may have been even had points where they were homeless. And then they're back on their feet and they're like, I need to make a change. I need to do something different.

Davidson (voiceover): Clearly, a shortage of affordable housing is a severe problem for people like Merritt and her family. But why should other people care? And why has the Atlanta Fed made affordable housing a priority?

Here's Atlanta Fed president and CEO Raphael Bostic, an economist who has studied housing issues for more than 20 years.

Raphael Bostic: I think about this in a couple of different dimensions. So one is just the fact that when people are not housed stably, they have other things that don't go well for them. So they don't get and hold jobs as consistently. They're not as healthy as they might be. They're under a lot of stress, and there's a lot of evidence that shows that people under stress make poor decisions. They get focused on the scarcity—I think people sometimes call it the poverty trap—and their kids don't do as well in school.

And so by not having stable housing, you wind up with potentially a large portion of the population that is just not operating at potential. And that not operating at potential is a problem from a macro perspective because it's our collective potential which determines how healthy the economy is, how robust it is, and how resilient it is. And so just at a person-to- person level, the instability that arises when we have a lack of affordable housing—it's a hit to our economic potential in a very direct way.

Davidson (voiceover): There's still more to it. When people are in unstable living situations, and move often—like the Merritts did—that gets really expensive. It saps the family's ability to establish a financial safety net, among other effects.

Here's Lisa Gordon of Habitat for Humanity again.

Gordon: I think housing is foundational to a number of different issues—for example, education. There's a lot of focus on kids' education and outcomes. But the number one issue that affects children and their success in education is their stability of housing. So if they move three or four times during the year, they've changed schools, their education outcomes are going to be much lower. So having a foundation for housing is really important. Same thing for health. If you're in poor conditions, whether the housing is inferior or there's leaks or there's issues with water or sanitary issues, you find that health issues are increased as well. Food security—it can be an issue if a family is deciding whether to pay rent or to buy food. They may not be buying the healthiest food; they might be getting the bargain food. So there's a lot of just basic needs that are implicated if you don't have stable housing.

Davidson (voiceover): Bill Bolling has observed the corrosive effects of unstable housing for 40 years. Bill founded the Atlanta Community Food Bank and the Atlanta Regional Housing Forum, which is a group that explores issues including affordable housing and homelessness.

It takes broad collaboration to tackle an issue as deep seated as the affordable housing shortage. A critical element in making these collaborations work is for the various players—the public officials, affordable housing advocates, nonprofit and for-profit developers, funders, and so on—to be heard and respected, Bolling said.

In dealing with those stakeholders and with the broader public, it is often necessary to spell out why they should care about a lack of affordable housing for low- to moderate-income people.

Bolling: I learned this in food banking. When I first began—I was part of starting food banking in the country— I found out very quickly if I went to a grocery store chain, I had to make a business proposition—not as a nonprofit, or a minister, or “we should feed the hungry,” it had to be a good business decision. So there you're creating win-wins, right? Where everybody's getting their needs met. We have to approach housing the same way.

It's very easy to blame the policymaker for not having the political will to do things right, but you have to set in their shoes and say, what constituency are they trying to satisfy? Same way with a housing developer. They've got to make the numbers, and the numbers don't work when you get down to 60 percent or under of AMI. So, again, you have to figure out...

Davidson: By AMI, you mean area median income?

Bolling: We do.

Davidson: So you're basically saying if the builder or developer... You know, you need to charge lower rent, well, that's immediately skews the...

Bolling: There's got to be incentives on the table for him. It's a carrot or a stick. I think the goal for us is to all have a sense of ownership in our community.

Davidson (voiceover): A lack of affordable housing, even for middle-income earners like teachers, firefighters, and police officers, can limit a metro area's growth potential. And if people cannot afford to live near their job, they're going to have longer commutes, and that means more traffic congestion.

Here's Raphael Bostic again, CEO of the Atlanta Fed.

Bostic: And so a lot of people, when you think about our commute during rush hours, it's horrible. I hear that a lot here in Atlanta. I lived in Los Angeles—I know about bad commutes. Part of cost, part of that congestion is a function of housing—not housing that's affordable, not being located close to where people are trying to work. And so there's a cost to affordable housing or to a lack of affordable housing that we are all incurring all the time.

Davidson (voiceover): Let's go to Lisa Gordon of Habitat for Humanity again.

Davidson: If people do have a grasp—[they say] like okay, yeah, you know, I think I do get why this is a big deal. Is that important? Or how important is that to really move the needle on this?

Gordon: I think it's extremely important for people to understand the question of what's in it for me, because that's the only way that people come together for change.

Davidson (voiceover): Let's go back to Lakiesha Merritt. On October 23, Merritt and her two youngest children will move into their new home on the south side of Atlanta, leaving behind years of anxiety. Merritt's 22-year-old son won't be there. He's in Kuwait as a combat medic with the Army Reserves. But her daughter will be there, and so will 6-year-old Ladarrius. For him, the new home will be a complete surprise. Lakiesha hasn't told Ladarrius about it. He'll even have his own bedroom. Right now he's sharing bunk beds with mom.

Davidson: So your older kids know about this program? How did they react when they found out?

Merritt: My daughter is elated, because—like I said, she's, she's grown now, she's 18 now—I started the process while she was 17. But she's happy. She's elated, and it's less worry on me and I don't like for my kids to have to worry about me cause I went through a really... It was dark. I was depressed. I was angry. I felt like I failed them. And not having to worry about the things I had to worry about. Most people just, you know, they get the water bill, they pay it, and they just keep moving. But having to make decisions on how we eat, are we going to get to do this and that cut back on...or you're going to have to wait on these shoes. They had their necessities. I made sure they had their necessities. But kids are kids. and they want to have fun as well. I want to have fun. Everything is just not about, I'm going to work to work to be worried about work and then I'll come home to worry if the house on fire or the basement's flooded.

I'm a better parent for them, because I used to be worrying about things nobody should be worrying about. Like I was sitting at work trying to type up reports, and I'm sitting there just worried all the time. 'Cause it was always something. It was always something.

I can't even cry no more. If I can get tears of joy when my baby sees the house, it's fine. We're all elated.

Davidson: Thank you for listening to this special Economy Matters podcast. I'm Charles Davidson, staff writer for the Atlanta Fed's digital magazine, Economy Matters.

Please read the companion story to get a more in-depth look at the affordable housing crisis. This piece is an instalment in a series that we're doing on economic mobility and resilience. Visit frbatlanta.org to read the rest of this series. It began with our annual report that explored the varied microeconomies that make up the larger national economy. And the second chapter in our series examines the critical role that workforce development plays in helping to spread economic opportunity. The final chapter, scheduled for a December release, will look at the challenges facing small businesses and the important role they can play in spreading economic mobility and resilience in southeastern communities.