America is in the midst of a rental housing crisis that is hitting low-income renters the hardest. To help low-income renters find new homes and stay in them, affordable housing advocates have come up with some creative solutions.
For many years, rents have risen dramatically while incomes remain stagnant. 80% of renters earning less than $30,000 were cost-burdened in 2017, paying more than 30% of their income for housing. More than 40% these renters paid over half their income for rent. Federal housing assistance has not kept up with the need. Only 35 affordable apartments were available for every 100 extremely low-income households in 2017. There are no counties in the U.S. where someone earning minimum wage can afford a two-bedroom apartment. Evictions are a growing problem, with many families one injury, illness or car breakdown away from failing to pay the rent.
One effort to address housing instability is being led by Make Room, Inc. This organization is dedicated to raising awareness about America’s rental housing crisis. Collaborating with Citi Community Development and Credit Builders Alliance (CBA), Make Room is promoting Housing Stability Loans for low-income renters in Washington, DC, Miami, FL and Chicago, IL. The funds can be used to help renters with security deposits, move-in expenses, keeping up with bills and avoiding eviction. The loans are made by local organizations affiliated with CBA. If the program is successful in these three cities, the partner organizations hope to expand it to other communities next year.
Although the local organizations in Chicago, DC and Miami offer different terms for their housing stability loans, they follow similar guidelines. According to CBA, the maximum loan limits range from $1,000 to $3,000 among their members, with an average interest rate of 11%. The loan terms can range from 6 to 36 months. Small application and loan origination fees for the borrowers may be included. The local lending organizations also offer financial fitness training and counseling. This improves the odds that renters will be able to pay back their loans, pay their bills on time and show a steady credit history.
In the DC program run by Latino Economic Development Center, loans are for up to $2,000, repaid over 12 months with a 9% interest rate. When asked by Affordable Housing Online why the program provides loans instead of grants, Make Room’s CEO Ali Solis said that the loans allow low-income renters to build credit. In addition, Solis noted that the loan model maximizes the resource. When loan funds are repaid they can then be used to help other renters.
Talia Kahn-Kravis, Manager of Counseling and Program Innovations at Credit Builders Alliance, said that Housing Stability Loans can address the serious cash flow gaps many low-income renters face as they try to keep a roof over their heads. When asked by Affordable Housing Online how the loans are funded, she said that their local members funding comes from a variety of sources. Many of CBA’s local members are Community Development Financial Institutions (CDFIs) that receive funding from the U.S. Treasury Department. Many CBA members also receive loan fund investments from banks and credit unions. Banks need to demonstrate under the Community Reinvestment Act (CRA) that they are serving all segments of their communities. Investing in Housing Stability Loan programs meets their CRA obligation to serve low-income households. More local organizations are also receiving loan funds by way of “impact investing” from private investors. These socially conscious private investors want to make a return on their money, but they also want their investments to have a large impact on local communities.
Housing Stability Loans are a new tool to help low-income renters find and keep affordable housing. However, the affordable housing crisis needs to be addressed on several fronts. More federal funding is needed for rental assistance and building new apartments. Wages need to rise to keep pace with cost of living. Local obstacles to development, such as exclusionary zoning laws, need to be revised. But to get these things done, raising public awareness and engaging with elected officials is needed.
Make Room’s mission is to give voice to struggling renters and elevate affordable housing on the national agenda. The organization’s goal is to engage 1 million renters on their online platform to send 1 million messages to elected officials by 2020. Every renter who reaches out to their representatives helps give weight to the importance of today’s affordable housing crisis.