Much of the public conversation around the housing crisis has focused on homeowners struggling to pay their mortgages. However, the housing market woes have also extended to renters.
Housing is considered “affordable” if the mortgage/rent and utilities cost no more than 30 percent of the net household income. In 2010 33.5 percent of all Minnesota households were cost-burdened (paying more than 30 percent of their income for housing), with renters more likely to struggle than homeowners. Half of Minnesota’s renters are cost-burdened with nearly one-quarter being severely cost-burdened (paying more than 50 percent of their income). Those with the lowest incomes are most likely to be paying more than they can afford for housing.
The rental market is also becoming tighter. Former homeowners who went through foreclosure are now competing for scarce rental vacancies, as are many peopel who are nervous about purchasing homes they aren’t sure are the investments they used to be. In the past two years Twin Cities rental vacancies have declined a dramatic five points to just 2.3 percent (a ten-year low). Rents have increased in response.
Balancing the housing market will take time. Thousands of homes sit empty, but many need significant rehab before they can be occupied by renters or homeowners. Planning and construction of new units is a slow process. In the meantime, Minnesota can do a few things to help renters who are cost-burdened or shut out of the market entirely.
Protect the Renters’ Credit: Just as homeowners receive tax breaks, Minnesota renters are eligible for a refund based on the property taxes their rent helps to pay. Over 300,000 low- and moderate-income households benefit from the Renters’ Credit. This refund provides an essential infusion of extra cash for those struggling to make ends meet. Unfortunately, a budget cut passed last year reduced the credit by $26 million. A current House proposal would reduce the Renters’ Credit even further in order to pay for a property tax break for business owners.
Promote eviction prevention: Many renters lose their housing over a relatively minor crisis. Cost-burdened renters can’t weather even a small unexpected expense such as a car repair or a few missed days of work due to illness. Preventative services often include short-term financial assistance to cover the month’s rent. Social workers can also provide resources to stretch the family’s budget, landlord/tenant mediation, or crisis intervention as needed. Hennepin County reports that it spends $875 to prevent a family from becoming homeless. If that family were to lose their housing, their episode of homelessness would cost $5,000 in shelter and social services.
Invest in workforce housing: By supporting the current bonding request for $40 million in housing development and preservation, we can keep critical affordable rental units on the market and accelerate the development of new housing statewide.
Encourage renter-friendly communities: Many municipalities are considering limits on rental housing density due to concerns about foreclosed homes being turned into investment properties. Every community should plan for safe, decent, well-maintained neighborhoods. But with an increasing number of Minnesotans turning to rental housing, rental opportunities have to be carefully incorporated into these plans.
The poor housing market has affected nearly every one of us and we have a slow recovery ahead. In the meantime we need to ensure that those most harmed don’t lose further ground.