Forced to Live Above Their Means

Forced to Live Above Their Means

Inland Region Families Struggle for Access to Affordable Housing

S.E. Williams | Contributor

Individuals and families in the inland region are struggling for access to decent affordable housing while many of those who have housing are living above their means, renting houses or apartments they cannot afford. In other words, they are paying much more for rent than they can reasonably afford. 

U.S. Congressman Mark Takano represents the 41st congressional district which includes the communities of Riverside, Moreno Valley, Perris and Jurupa Valley and is addressing this issue head-on by identifying the percent of rent burdened residents in these communities, the circumstances that led to these circumstances and providing meaningful and breakthrough ideas for potential solutions.  

The Department of Housing and Urban Development defines those who pay more than 30 percent of their income for housing as cost/rent burdened and those who pay 50 percent or more of their income on housing as severely rent burdened. An updated report just released by Takano, “The Heavy Burden of Rent in Riverside,” brings added focus to the impact the rising cost of housing has on renters in Riverside County. 

The report found about one in three households in the region are severely rent burdened, noting no less than 30.2 percent of all Riverside County renters spend more than half their annual income on rent. The percent of severely impacted rental households in the 41st congressional district by city are Riverside (27.3 percent), Moreno Valley (29.9 percent), Jurupa Valley (33.5 percent) and Perris (40.3 percent).

After adjusting for inflation, the study presented a contrast between the change in the county’s median average income which has decreased by (-)7.2 percent since 2007, while the area’s rents increased 3.8 percent during the same period. 

For example, the City of Riverside experienced a 5.9 percentage point decrease in income and a 5.2 percentage point increase in the cost of rent; the City of Moreno Valley fared only slightly better in comparison—although the cost of rent has reached the  pre-recession levels of 2017, household incomes decreased 5.6 percent. The gap between income and rent has resulted in severe and far-reaching consequences for families and the region.

“To help more Americans achieve decent, affordable housing, we must examine the present conditions of our rental market and how they have shifted over the last decade, taking into consideration the full scope of issues affecting tenants in our community and nationwide.”
– U. S. Representative Mark Takano

Adding pressure to the increased cost of rent in Riverside County is the decrease in vacancy rates (housing available to be rented or purchased). Currently, the county’s rental vacancy rate is partly the result of displaced homeowners who lost homes owed to foreclosures during the great recession who now rent.  In the decade between 2007 and 2017 rental vacancy rates in the county declined by 2.7 percent. 

The downward pressure on the rental and homeowner vacancy rates (homeowner vacancy rates declined by 2.5 percent) is further impacted by the region’s surging population growth. Since 2007, Riverside County has experienced an overall population increase of 17 percent compared to growth at the state and national levels of eight percent each.  

Competition for affordable rental housing in Riverside County has increased by 23 percent over the last decade driving up prices and placing more economic pressure on renters. Many of the areas’ renters who desire to be homeowners find themselves priced out of the housing market. The lack of affordable housing stock in the county, driven by a decline in homeowner vacancy rates and a surging population, has put homeownership out of reach for many.     

“Homeownership is often seen as a stepping-stone into the middle class, an investment for a secure retirement, and a pathway to upward economic mobility,” said Takano. “Unfortunately, homeownership is out of reach for families in our community and across the country, and families are renting more. The lack of affordable housing is becoming burdensome for many in Riverside County.” 

He stressed, “We need to support vulnerable renters and assist aspiring homeowners in this current housing market if we want our economy to prosper and our community to thrive.”

A tight housing market is driving up the price of houses and trapping more potential homebuyers in the rental market making it even more difficult to find affordable, decent rental housing for those on the lower end of the economic spectrum. 

More than a decade after the nation’s economic meltdown in 2008, renters in Riverside County, across the inland region, and around the nation are being “squeezed” to the point of desperation. As stated in the report, “Whether one is living on the brink of homelessness or is an aspiring homeowner, burdensome housing expenses bring severe and far-reaching negative consequence for families and communities.”

Sadly, those who are heavily rent burdened in Riverside County are not unique. 2017 census data showed nearly a quarter of American households who rented in 2017 were “severely” rent burdened.  

Takano stressed, “Heavy rent burdens can threaten housing security and stifle economic growth and prosperity in our communities.” He again highlighted how such economic strain makes it more difficult for families to achieve upward mobility or purchase a home. Homeownership is one of the most effective means of achieving long-term economic prosperity and building inter-generational wealth.

The report examines rent costs, household income trends, and housing availability between the years 2013 to 2017, in addition to the how the local housing market is being impacted by institutional investors that purchase large quantities of single-family rental homes in targeted communities across the country and then securitize the properties into bonds that produce lavish returns for the investors.

According to Takano, this process creates a money stream that flows from the wallet of Riverside tenants to the pockets of Wall Street landlords. He added, “[This] conjures up memories of the toxic mortgage-backed securities gambit that exacerbated the financial crisis a decade ago.”

Expounding on this during an exclusive interview with The IE Voice/Black Voice News, Takano spoke about how frustrating it was to watch people who were in positions to purchase homes and could have benefited from the drop in prices as a result of the Great Recession, being side-lined by hedge funds, capital groups and Wall Street.” Some of whom were responsible for the mortgage crises in the first place,” he recalled. 

“What’s concerning is that these bulk sales purchased by companies like Blackstone, for example, really haven’t sold off their properties. There was some speculation they would sell them off as the market recovered and as home prices increased, [when] they could sell at a profit.” For the most part, however, they are not selling these properties but renting them out instead. 

“The other part of this,” he continued, “is when people are turned out of their homes, they previously owned or were paying mortgages on, in mass, the rental market becomes really high.”

“These same companies,” he acknowledged, “are making a lot of money off the rentals; instead of mortgages backing a kind of securitization bond, they are [now] using the rental streams from renters to pay off these bonds and bonds holders are making enormous profits.” 

Takano continued, “Now that these fire-sale properties have dried up, what is so concerning to me is that some of these hedge fund companies are actually looking at building their own homes to rent—single family homes, not apartment buildings. I think this has a negative effect on the community and neighborhoods.”

He explained further how too many rental properties in a neighborhood (no reflection on renters), can create questions over who maintains the homes and questions about how responsive corporate landlords are compared to  owners of rental properties who tend to have one to three properties they own and rent for added income and usually live in or near the community where the properties are located. “I worry about the cumulative effect of [corporate owned rental properties] on local communities.”

Takano recently joined Congresswoman Barbara Lee (D-Oakland) on legislation that would impose a financial transaction fee ½ of one percent on stocks and bonds that are traded. “There are millions of these transactions,” he stated highlighting how this is one way to try and balance out the enormous profits that Wall Street makes. 

“This [fee] can generate quite a bit of revenue to help with low income housing programs,” he declared. “Hedge funds [put together these properties] that are traded, and they suck money out of the community because the rents go to pay off all the Wall Street bonds.” In other words, they are not recycled within the local community. 

Wall Street’s approach to rental housing is not building equity or wealth for the person renting the homes. He further acknowledged the fee is not a complete solution but the logic of it is, “Wall Street was bailed out at a great expense to the rest of the tax base.” The investor class, he noted, continues to live well and make huge profits. “I think the volume of trading could be tempered quite a bit by imposing a fee on each individual trade. I would use that money for housing, education, etc.,” he reported. 

Recognizing how Wall Street/corporations control wages, the costs of buying and now, renting houses, he stressed a need for the nation to revise/rewrite the rules of the economy. “They affect us more than people think.” 

Consumer protection laws are one way to temper Wall Street excesses and the Consumer Financial Protection Bureau (CFPB), was established in the wake of the Great Recession for that purpose. However, its protections have been weakened under the Trump administration.  

Representative Takano also talked about how important it is to address the issue of income, so people have more earning and buying power. He stressed how the income is even broader than the important issue of wages/salaries.  One issue he highlighted was the overtime pay of salaried employees. According to Takano, the overtime threshold needs to be updated. 

“The threshold [for employees on salary] used to be high enough so that 60 percent of the salaried workforce was eligible for overtime pay. Now only 7 percent are eligible,” he explained. He also discussed how employees are classified also makes a difference, adding there is a “duties test” that defines how employees should be classified i.e., employees versus independent contractors. He discussed how all of these are pieces of the puzzle that impact people’s take-home pay—minimum wage, salary thresholds impacting overtime time pay and duties testing. The earning power of American workers goes to their ability to afford housing, save for retirement and provide for the higher education of their children—again, it’s about building inter-generational wealth. 

Takano’s report offers several recommendations for lowering the cost of rent. They include increasing the inventory of affordable housing; making rent more affordable by expanding access to housing assistance programs; putting a check on Wall Street’s presence in the single-family rental market; and defeating President Trump’s plan to raise rent on millions of vulnerable households by reducing funding to the Department of Housing and Urban Development (HUD). 

In addition to these recommendations, Takano offered a breakthrough idea that would prevent landlords from using credit scores to deny tenant applications without further consideration. The proposal calls for an examination of how credit scores are used in housing—particularly in relation to renters—and how that impacts communities of color and low-income communities. 

The way credit scores are currently used results in many renters being denied access to housing, prevents them from moving to other rental properties or requires individuals who pay their rent but live from pay day to day to come up with high deposits that can be two to three times the rental amount because their credit scores are low. Although others have discussed this as an option, Takano is the first representative to offer a strategy to address it.    

To view Takano’s full report online visit https://takano.house.gov/newsroom/press-releases/rep-takano-releases-updated-report-on-the-heavy-burden-of-rent-in-riverside.

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