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Emerging From the Nuclear Shelter

5 min read

If you work in affordable rent housing, you know from personal experience that some (many?) of your tenants have unreported side hustles—flexible work or overnight guests—the revenue from which helps them pay the bills and keeps them out of eviction. You are supposed to exert all conceivable zeal in exposing this, and you know that is a fool’s errand. Now an innocuous notice from an obscure part of the Department of Housing and Urban Development published for comment a few months back contains a principle, unvoiced for decades, that might be the germ of a revolution. Taken to its obvious conclusion, it implies we should upend a double fistful of longstanding prohibitions and regulations that force very low-income tenant households into shadowy contortions and moral managers into sympathetic selective blindness that both have experienced since the Brooke Amendment in 1968.

Until a century ago, an American home was usually a self-constructed asset: As a famous president opened his autobiography, “I was born in a house my father built.” These homes could accommodate three generations (though usually not for long, as American life expectancy in 1900 was 48 years), and three-generation living was the norm: in 1900, 57 percent of Americans 65 and over (71 percent of widows) lived with one of their grown children.

Throughout the entire pre-HUD era a home (self-constructed or developer-built, owned or rented) was universally understood to be a space whose occupancy flexed over time as its occupants desired. Housing demand is elastic, household size is changeable, and the drivers have always been birth, aging and money. “During the Great Depression, parents and their adult children often moved in together to save money,” and of course in our post-Great-Recession, post-COVID environment, perhaps as many as one in five of Gen Y and Gen Z Americans moved back in with or are still living with their parents. 

The reverse also happened: Depression families “often broke up because the younger members had to leave town to find work,” which today is the subject of many a teen coming-of-age story and is invisible globally in emigration/immigration flows. When the able-bodied departed, those left behind faced new housing challenges: finding someone to take them in. “Before going, those who were most desperate sometimes placed their children in an orphanage and their frail parents in a poorhouse to make sure they had roofs over their heads.” Poorhouses, like workhouses and lunatic asylums, were at best overcrowded, unsanitary and unsafe – the last resort, avoided at all costs.

This changed with technology: with the arrival of the automobile and streetcar, and the ensuing suburbanization of the economy there emerged what would become known as the nuclear family (coined from nucleus, not fission). After World War II, suburban nuclear families boomed due to three innovations: automobiles and highways, subdivisions, like Levittown, and pension funds.  With a suddenly dispersed population, urban poorhouses and boarding houses were both driven to extinction by legal and health reform laws. The elderly who faced health problems, in turn, wound up in hospitals, who didn’t want them as long-term residents, and in 1954 nursing homes were authorized. They “were never created to help people facing dependency in old age. They were created to clear out hospital beds – which is why they were called ‘nursing’ homes.”

Nursing home regulation was only the first of multiple new governmental programs and funding streams, each well-intentioned and targeted to a specific household typology, that collectively had a curious, counterintuitive and eventually counterproductive result: they locked particular apartment configurations into defined uses. Then expanding HUD regulations (e.g., bedroom sizes and occupancy rules) locked household configurations into rigidly bounded limits. As average tenures in public or affordable housing lengthened as families clung to their bargain-priced accommodations, families aged in place, children moved out, the elderly died one by one and the household configuration invisibly changed. The result was either overcrowding (giving the household a right to move to a large unit, if any vacancies were available) or over housing (when the children had moved out, leaving grandma living alone in a three-bedroom filled with her furniture and her memories. These outcomes were not supposed to be tolerated.

Enter annual recertification, of both annual income and household configuration. This put owners and managers, whether of private affordable housing or public housing, in the position of economic and demographic busybodies, snooping on every raise, promotion or demotion, every birth, death, cohabitation, marriage, divorce or boomerang occupant, whether elderly or Gen Z. Some entities developed see-no-evil workarounds: permissible ‘short-term guests,’ ‘non-recurring income’ sources and gift cards, the people’s cryptocurrency. 

For two decades, the system stretched and strained, but COVID’s dramatic disruption of normal circadian rhythms of commuting and working precipitated long-term fallout, and the rise of Accessory Dwelling Units (ADUs) as a camel’s-nose means of adding density and household flexibility. A proliferating host of state and local ADU initiatives are chipping away at the nuclear-family, nuclear-shelter silo in favor of evolving households and evolving housing configurations. 

Now HUD has hesitantly entered the game: a recent draft Mortgagee Letter authorizes lenders to count projected ADU rental income as part of household income for a borrower to a loan under either Section 203(k) home improvement or the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) reverse mortgage. Even with some proposed limitations, FHA is thereby acknowledging that households have agency in deciding whether to add occupants, and there is both housing policy and household economic benefit in doing so. From there, rethinking tenant flexibility in related-party occupancy and tenants’ economic incentives for doing so is just an extension of logic.

When will such long-overdue thinking come to tax credits?

David A. Smith is founder and CEO of the Affordable Housing Institute, a Boston-based global nonprofit consultancy that works around the world (60 countries so far) accelerating affordable housing impact via program design, entity development and financial product innovations. Write him at [email protected].