Fittingly, on the 70th anniversary of the U.S. Housing Act, Econsult Corporation concluded a first-ever study measuring the economic impact of public housing and how it demonstrates that in addition to its role as an essential part of the housing market, it can make significant contributions to the local economy.
The study found that public housing generates a wide range of tangible economic benefits within local communities, in addition to its role as an affordable housing provider. Continued and enhanced investment to maintain this affordable housing resource will therefore directly support local economies as well as public housing residents.
Executive Director of the Council of Large Public Housing, Sunia Zaterman, was quoted saying, “we’ve always known how important public housing is to people on fixed incomes and low-wage families, but this is the first time that its role as an economic engine has been studied, and it’s an excellent reminder that when we fund public housing, we’re making a measurable investment in our communities as well.”
Dan Labrie, Chief Executive Officer of the Housing Authority Insurance Group says “this longstanding program is a good example of how the federal government can work in successful partnership with local communities.” He goes on to say, “In recent years, we’ve witnessed a sharp decrease in support from the federal government for this valuable asset; we wanted to make sure everyone knows the full story of how public housing benefits the wider community. We sponsored this study because of our commitment to seeing public and affordable housing thrive.”
About the Study
The study was sponsored by the Housing Authority Insurance (HAI) Group and supported by both the Council of Large Public Housing (CLPHA) and the Public Housing Authorities Directors Association (PHADA). The study focused on 10 separate markets that differ in scale, economic health and geographical location as well as the willingness of the local PHAs to spend the time and effort to collect the data and share with the research team. Those cities chosen were Akron, OH
; Boston, MA
; Charlotte, NC
; Dallas, TX
; Kansas City, KS
; Miami, FL
; New Bedford, MA
; Oakland, CA
; San Diego, CA
; and Seattle, WA
. While these selected cities may not statistically represent all public housing markets, they did provide a frame of reference about public housing nationally. Further information regarding each selected city is available on CLPHAs website at http://www.clpha.org/page.cfm?pageID=1072
The Public Housing Authorities (PHAs) participating in the study have a total of 44,222 public housing units, collectively spent $116 million on capital improvements in 2005 and anticipate spending an additional $700 million from 2006 to 2010. Nationwide, PHAs receive approximately $2.5 billion per year in capital funding.
The study considered the following four attributes:
- What benefits of public housing do residents receive?
- What are the economic benefits accrued throughout local communities?
- What is the impact of public housing on the local economic activity, employment and earnings?
- What is the economic value of the current stock of the public housing infrastructure?
Short history of public housing
The federal public housing program was created in the U.S. Housing Act of 1937 as a public works program that had an original intention of helping low-wage family’s gain temporary housing during the Great Depression. As the economy, regional demographics and government policies changed, however, public housing no longer could be self-sufficient and relied on the help of the federal operating subsidy. After a time, existing public housing policies were not developing provisions of quality housing and many cities were beginning to experience concentrations of the very poorest families in increasingly unsafe neighborhoods. PHAs had very little money to meet capital investment needs so Congress created the Housing Opportunities for People Everywhere Program (HOPE IV) in 1992 that provides seed money to replace deteriorating properties. Unfortunately, based on federal appropriations for public housing capital and operating subsidies for federal fiscal years 2000 to 2006, PHAs have been underfunded by $6.7 billion relative to estimates of their actual need.
Today, over 2.6 million people call assisted housing home, and in 2005, the median income of those households was $10,738; far below the poverty level and equal to only 23.2% of the national income of $46,326. Half of all public housing is home to seniors and people with disabilities who tend to have fixed incomes. Nearly 49% of the remaining low-income households receive their primary income from wages, most remain for less than 10 years and 40% remain no more than three years.
Econsult Corporation successfully identified four major attributes in their study. Concluding that public housing is a critical resource for low-wage workers, it plays an essential role in the nations efforts to preserve affordable housing, their expenditures contribute significantly both directly and indirectly to its local economies and public housing programs are extensively underfunded.
Critical Resource for Low Wage Workers
The average wages in some industries, such as food service, are too low for workers to afford market rate housing costs. Public housing provides an annual effective rent subsidy of approximately $6,000 to each of the more than 1.2 million households in the public housing program. Since wages compromise the main source of income for almost half of the non-elderly, non-disabled households in public housing, this rent subsidy provides indirect support to high-growth industries.
Essential Role in the Nation’s Efforts to Preserve Affordable Housing
Replacing a typical public housing unit would cost $134,858, considering both the costs of rebuilding the housing units and the costs of acquiring the land on which those units dwell on. If one was to factor in related land costs as well, it would take approximately $162 billion to replace the existing 1.2 million units of public housing. Furthermore, it was determined that the value of the existing public housing stock, maintained as affordable housing, to a private investor is considerably less than the aggregate replacement cost of the units. This difference indicates that the private market could not provide such housing services without significant subsidy.
Expenditures Contribute Significantly to Local Economies
Initial PHA expenditure has a ripple effect on a local economy. Direct effect, which includes facility construction and ongoing operations and indirect effects of spending by vendors and suppliers as well as PHAs have induced effects on a local economy with spending of salaries and wages by direct and indirect employees. This direct spending on capital improvements, maintenance and operations is approximately $8.1 billion a year and generates an additional $8.2 billion in indirect economic activity in the PHAs regional economies. The public housing rent subsidies help low-income workers obtain jobs and stay in otherwise unaffordable markets, thereby providing an indirect subsidy to local employers.
Public housing was underfunded by $6.7 billion between 2000 and 2006 compared to actual need. HUD announced in January that public housing authorities would only be receiving 76% of what they actually need to operate in 2007. As a result, PHAs across the nation are being forced to sell off stock, cut back on maintenance and security, and close down programs designed to assist residents.
This study represents the first systematic look at the quantifiable benefits of public housing. Director of PHADA, Tim Kaiser, says “this study demonstrates that public housing is a smart investment in families and communities. It is an excellent example of how the federal government can be a partner in addressing the shortage of affordable housing.” This study successfully was able to identify the benefits and value public housing has on the economy, a local community and the 1.2 million families it shelters.