Explore This Section

Cascade: No. 73, Winter 2010

Pennsylvania's Lowest-Income Renters Have the Greatest Needs

Nearly 85 percent of Pennsylvania’s extremely low-income (ELI) renter households spend more than 30 percent of their income on housing and 69 percent spend more than 50 percent.1 Not surprisingly, ELI renter households also have severe shortages of affordable and available rental housing in Pennsylvania. In addition, housing conditions and shortages have grown worse for this group during the first half of this decade.

These findings and many more are reported in a recent study conducted by the Community Affairs Department of the Federal Reserve Bank of Philadelphia. The study Affordability and Availability of Rental Housing in Pennsylvania was written by Erin Mierzwa, community development specialist in the Community Affairs Department, and Kathryn P. Nelson, an affordable housing consultant, along with Harriet Newburger, also in Community Affairs. The research was initiated to assess the housing needs of Pennsylvania’s lower-income renter households and to better understand how their needs vary across the state.

This study is particularly relevant due to the current state of the housing industry nationwide. The number of renters has increased in recent years, and this increase has added to the pressures that already exist in the affordable rental housing market.

In a recent report, the Joint Center for Housing Studies of Harvard University noted that “after averaging just 0.7 percent annual growth from 2003 to 2006, the number of renter households jumped by 2.8 percent, or nearly 1 million, in 2007. The growing number of renters must now compete for the limited supply of affordable housing, adding to the long-standing pressures in markets across the country.”2 The situation is exacerbated by the mortgage foreclosure crisis, which, in addition to forcing many previous homeowners to become renters, also has implications for current renters.

Key Study Findings

The study Affordability and Availability of Rental Housing in Pennsylvania uses two primary data sources to assess the housing needs of Pennsylvania’s lower-income renter households: special tabulations from the 2000 census that are called Comprehensive Housing Affordability Strategy (CHAS) data and similar tabulations from the 2005 and 2006 American Community Survey (ACS). The study distinguishes renters in three lower-income ranges:

  • Extremely low-income (ELI) — less than or equal to 30 percent of HUD-adjusted area median family income (HAMFI)
  • Very low-income (VLI) — between 30.1 and 50 percent of HAMFI
  • Low-income (LI) — between 50.1 and 80 percent of HAMFI

Following are key highlights of the study:

  • In 2000, more than 70 percent of ELI renter households in Pennsylvania faced some type of housing problem: either a cost burden or a housing unit problem (e.g., lack of plumbing or kitchen facilities or overcrowding). Renter households more frequently had cost burdens than housing unit problems. Those with a higher household income had fewer housing problems.
  • In 2000, ELI renter households were most likely to have severe cost burdens as well as shortages of affordable and available housing per 100 households in three different areas of the state. These areas included the Northeast (where Monroe County faced a particularly great challenge), Centre County (home to Pennsylvania State University), and the suburban counties of Philadelphia, particularly Chester, Delaware, and Montgomery counties.
  • In absolute terms, the seven counties with the greatest shortages of affordable and available housing units for ELI renter households in 2000 were Allegheny, Bucks, Delaware, Lancaster, Lehigh, Montgomery, and Philadelphia counties. Sixty percent of the state’s overall shortage of rental housing units for ELI households was attributable to these seven counties, and 42 percent of the state’s rental housing shortage came from only two counties: Allegheny and Philadelphia.
  • Housing conditions and shortages became worse for ELI renters from 2000 to 2005-06. During this time, the total shortage of affordable and available housing for ELI renters rose from approximately 170,000 to 220,000 rental housing units. In addition, at mid-decade, two out of every three ELI renters had severe cost burdens.

Context for the Study

To provide some background, the study explores rental housing characteristics in Pennsylvania and several surrounding states.3 In 2000, there were 11.8 million Pennsylvanians living in 4.8 million households. Of all households statewide, 1.4 million, or approximately 29 percent, were renter households. There is a great income disparity between owners and renters throughout the state. While this finding follows national trends, it further emphasizes the challenges that are faced by renters as well as state and local policymakers in Pennsylvania.

In comparison to neighboring states and to other areas of the country, Pennsylvania has some particularly challenging housing characteristics. Most notably, the state has:

  1. An older rental housing stock — Over two-fifths of the rental housing units were built before 1950.
  2. An older renter population — One-fifth of renter heads of household are age 65 or older.
  3. Small rental structures — Over 60 percent of renter-occupied units are in one- to four-unit structures.

Implications for Policy

The study offers a valuable methodology for quantifying rental housing needs from current data. State and local policymakers can use the data provided in this study to help develop local rental housing strategies. A key finding of this study is that rental housing markets within Pennsylvania differ markedly in the extent of the shortage of units that are affordable and available to ELI and very low-income renters, as well as in vacancy rates and population growth trends. This finding reinforces the importance of choosing strategies that are sensitive to local housing market conditions.

As highlighted in the study, shortages of affordable and available housing units do not always imply that additional units must be built because, in many cases, providing rental assistance could enable renters to rent another unit affordably or to better afford their current unit. In some parts of Pennsylvania, the use of vouchers or other rent subsidies may be sufficient to address most affordable rental housing needs. In other areas of Pennsylvania, expanding the affordable rental housing supply may be warranted.

This study concludes by offering the following questions to help state and local policymakers develop effective local housing strategies:

  • To what extent do units that are determined to be affordable and available actually meet the needs of the local lower-income renters who require affordable housing?
  • What is the quality of the rental housing stock that is affordable and available to lower-income households?
  • Are the units that meet basic quality standards and are currently affordable and available to lower-income renters likely to remain so in the future? This is a two-part issue: These units must be preserved both physically and as affordable housing.
  • When a local housing strategy includes an increase in rental housing supply, is local planning capacity sufficient to take advantage of these opportunities and meet the challenges?
  • How will policymakers address the rental housing needs that have resulted from the mortgage foreclosure crisis?

Regardless of the ultimate decisions that are made to address rental housing needs for the lowest-income renter households, this study provides policymakers with solid data about the affordability and availability of rental housing throughout Pennsylvania. To see the report, go to www.philadelphiafed.org/community-development/publications/special-reports/.

  • 1Data are from the 2005 and 2006 American Community Survey, as calculated by the Federal Reserve Bank of Philadelphia. ELI renters are those with incomes less than or equal to 30 percent of the area median income. Households that pay more than 30 percent of household income on rent and utilities have cost burdens, and households that pay more than 50 percent of household income on rent and utilities have severe cost burdens.
  • 2 Joint Center for Housing Studies of Harvard University, “America’s Rental Housing: The Key to Balanced National Policy,” (2008), p. 2.
  • 3 Data in this section are from the 2000 Decennial Census. External Link

E-Mail Notification

Find out when information for community development publications and events is released.

Contact Us

Federal Reserve Bank of Philadelphia
Community Development Studies & Education Department
Ten Independence Mall
Philadelphia, PA 19106-1574

(215) 574-6037 – phone
(215) 574-2512 – fax

View All Contacts