While the housing market's unexpected strength has offered the otherwise anemic economy some hope, lower- and moderate-income homebuyers and renters are finding it harder and harder to find affordable housing.

Homebuyers are being forced to cobble together a bigger portion of their income to make even small down payments, while renters are shouldering the burden of mounting housing costs, a study by Harvard University's Joint Center for Housing Studies says.

"Housing affordability problems in the United States have become more pervasive, affecting a small but growing number of moderate-income households as well as low-income families," says the report, which was released today. "Over 14 million owner and renter households spent more than half their incomes on housing in 1999. … Even with both spouses employed, more than one in five low-income married couples have severe cost-burdens."

Reasons cited for the heavier burden include the building industry's self-restraint, restrictions on land development, exclusionary zoning practices, and a growing polarization in the two extreme ends of the market.

In particular, baby boomers' appetite for high-end second and luxury homes has raised the value of residential property to record highs and will continue to do so, the report says.

The real estate and lending industries took a hit in the late 1980s and early 1990s, and one result is that speculative building has been held at bay for the last five to eight years, the report says. While this may signal a positive trend for the financial services and real estate communities, it has not proved so beneficial for consumers, it says. As a result, supply of housing has hit historic lows in the last few years, and the report says that even if sales were to drop 20% during the current downturn, as it has in the past, the supply of homes for sale would remain under four months, compared with the 10-month supply during the recession of 1990-1991.

The report says all indicators point to a worsening situation for those at the lower end of the income spectrum.

"Housing affordability problems may well worsen of the coming decade," it says. "Because of their lower average incomes and wealth, many minority households will face special challenges."

Homelessness is also on the rise - as many as 700,000 Americans are now homeless on any given night, the report said. A recent survey by the U.S. Conference of Mayors indicated that demand for emergency shelters increased 15% last year, the largest single-year increase in the 1990s.

The government will have to intervene to prevent a crisis in the next decade, the report asserts.

It says one reason housing affordability may get worse in the next decade is that much of the supply of federally assisted units "is at risk." High land costs, a dwindling supply of developable land, and growing pressure to limit growth on the city and state level will probably make conditions tougher, even for moderate-income families, the report says.

"Addressing these challenges requires a combination of initiative to preserve the assisted housing stock and to expand the supply of affordable units," the report concludes. "Without increased efforts at the national, state, and local levels, the goal of a decent and affordable home in a suitable living environment for every American will remain unfulfilled."

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