“…far too many Americans lack access to affordable and quality housing. Nationwide, we have a shortage of available, affordable housing units for low-income individuals. Tens of millions of Americans spend more than 30% of their income on housing – leaving them with nowhere near enough money left over to meet other needs, from groceries to prescription drugs.” – Joe Biden, Presidential Candidate
Clearly a lot of folks struggle to meet their housing costs and in some parts of this country, the cost of housing is absurdly high. However, these facts tell me nothing about what to do about the problem. More information is needed, starting with a definition of unaffordable housing.
As implied in the opening quote, housing is often considered unaffordable if it requires renters or homeowners to spend more than 30% of their income on housing costs. For renters, housing costs include monthly rent payments and the cost of utilities if not included in the rent. For homeowners, housing costs include monthly mortgage payments, property tax, property insurance, utilities, and condo or mobile home fees (if applicable).
Housing wonks describe individuals who pay more than 30% of their income on housing as “cost-burdened”. So, who are these people, where do they live, and why can’t they find affordable housing? That’s a bit more than I can chew for a two-minute post (my goal), but here are some tables and maps that tell part of the story.
Bottom-line: Most low-income, around a fifth of middle-income, and relatively few high-income US households are cost-burdened, as defined previously. Here are some of the characteristics of those households:
It’s odd that so many of the low-income households are classified as cost-burdened in the first table, yet almost a third of the low-income group in the second table are homeowners with no mortgage left to pay. How many of these individuals actually need housing assistance? Something to ponder. In the meantime, these maps show where housing is least affordable in the US:
Housing affordability is clearly a huge problem on the coasts and in some inland cities. Yet I’m not sure that paying more than 30% of one’s income on housing necessarily means one is suffering financial hardship. That 30% threshold came from the early 1960s when Americans spent almost a quarter of their monthly expenditures on food. Today we spend half as much on food, so shouldn’t we be able to spend more on housing? Spending no more than 30% of one’s income on housing might still be ideal for most low-income households but a lot of better-off households could afford to pay more*.
Next: What type of housing assistance is needed, for whom, and how much would it cost?
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* For the record, I’ve been “cost-burdened” for decades, yet managed to save for retirement and take occasional trips abroad. A better measure of affordability would be how much money is left over after paying for housing and medical costs.
Reference:
Dumont, Andrew M. (2019). "Housing Affordability in the U.S.: Trends by Geography, Tenure, and Household Income," FEDS Notes. Washington: Board of Governors of the Federal Reserve System, September 27, 2019, https://doi.org/10.17016/2380-7172.2430.