Even if rents at the bottom-end of the market fall during a downturn, they will not fall sufficiently to provide extremely low-income renters with an adequate supply of affordable housing. Owners have an incentive to abandon their rental properties or convert them to other uses when rental income is too low to cover basic operating costs and maintenance. They have little incentive to provide housing in the private-market at rents that are affordable to extremely low-income renters.
During periods of economic growth, the private market on its own still does not provide an adequate supply of rental housing affordable to low-income households. The rents that the lowest-income households can afford to pay typically do not cover the development costs and operating expenses of new housing. While new construction for higher-income renters encourages a chain of household moves that eventually benefits lower-income renters, new luxury units may not impact rents at the bottom of the market as much as they do rents at the top ( Jacobus, 2019).
Because the market consistently fails to provide adequate, affordable housing for these renters, the government has an essential role to play to correct for this structural failure. The construction of public housing, subsidies to private developers to construct and operate affordable housing, and deeply income targeted rental assistance to tenants renting in the private market are needed.