The Growing Burden of Housing for Low-Income Renters

The Issue:

Housing costs relative to household incomes are high in many cities across the country. Paying for housing was an increasing burden for an important share of households even before the pandemic recession hit, especially among those who rent. However, rates of cost burden have not risen symmetrically across households of different income and education levels. Households with lower incomes and less education have experienced larger increases in housing cost burden in the past two decades. Paying a large portion of income towards housing can push out other types of household spending and can lead to material hardship such as food insecurity, difficulty paying bills, and forgoing needed medical care.

While median rents have risen in many parts of the country since 2001, median renter household incomes have remained largely the same.

The Facts:

• The number of households who are housing cost burdened, defined as paying more than 30 percent of income towards housing expenses such as rent and mortgage payments, has increased substantially over the past two decades. Between 2001 and 2017, the number of housing cost burdened households increased from 31 million to 38 million—nearly a third of all U.S. households. Renters make up approximately a third of all households, and a higher share of renter households than owner households face affordability problems: nearly half of all renters in the U.S. are cost burdened.
• While median rents have risen in many parts of the country, median renter household incomes have remained largely the same. High median rents in cities such as San Francisco, New York, Boston, and Washington, D.C. have been well documented, but cities including Fort Worth, TX, Mobile, AL, and Fort Wayne, IN, have also experienced substantial growth in rents in recent years, based on asking rents for online listings of vacant units. There are many possible reasons for rising housing costs in U.S. cities including land use regulations that have constrained housing supply, increased demand for housing in urban areas as crime rates have dropped, and new construction that has prioritized higher-end rentals rather than lower-cost units. For many renter households, incomes have not kept up with these rising rents. While inflation-adjusted median rents have risen by more than 10 percent since 2001, median renter household incomes declined during the 2001 recession and the Great Recession starting in 2007 and only began to recover slowly in 2012. This growing ratio of housing costs to income has led to increasing numbers of households who are housing cost burdened. 
• Low-income renter households experience even higher rates of cost burden. Previous research has determined that low-income households (those earning 80 percent or less than the area median income) face higher rates of rent burden than those earning more, and this burden is also more severe. Over 70 percent of extremely low-income households (earning 30 percent or less of area median income) are spending more than half of their income on housing. Renter households with the lowest incomes represent the highest rates of cost burden (see chart). Over 80% of households earning less than $15,000 are cost-burdened. And, cost burdens have been rising among renters with higher incomes. From 2000 to 2010, the percentage of lower middle and middle-income households facing rent burden increased nearly 50 percent, with rent burden becoming more prevalent for all households after the Great Recession.
  
• The ratio of housing cost to income has not risen at the same rate across households with different levels of income and education. Renter households with lower incomes and less education have experienced larger increases in cost burden. Using U.S. Census data, we analyzed the distribution of rent-to-income ratio over time by income quintiles and levels of education. Results indicate that households in lower income quintiles and households with lower levels of education experienced larger increases in the ratio of housing cost to income between 1970 and 2010. Even within income and education groups, the burden is not symmetrically distributed: lower-income and less-educated households with higher levels of cost burden experienced bigger changes during this period.
• Housing cost burden is associated with higher likelihood of experiencing material hardship, including food insecurity, difficulty paying bills, and difficulty affording medical care. Using data from the 2008-2013 panel of the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP), we and colleagues modeled the predicted probability of experiencing material hardship given housing cost burden, after taking into account various demographic characteristics, household income, household composition, and region. Housing cost burden was associated with higher probability of multiple types of material hardship. Households with higher cost burden were more likely to experience food insecurity, which could mean not having enough food, being unable to afford food, or being unable to afford balanced meals. These households were also more likely to have difficulty paying full rent or mortgage amounts, utility and phone bills, and essential expenses. Higher burden was also associated with higher likelihood that a member of the household would forgo a needed doctor, dentist, or hospital visit because of the expense.
• The results also indicate that the risk of material hardship increased as housing cost burden increased, but the risk remained relatively constant with a rising cost burden for households that spent at least half of their income on housing. The positive relationship between likelihood of material hardship and housing cost burden levels off once the cost burden reaches approximately 50 percent, indicating that households paying any amount over 50 percent of their income towards housing have similar probabilities of experiencing material hardship. It is possible that all households that pay more than a majority of their income towards rent face a similar (and high) likelihood of material hardships such as food insecurity, difficulty paying bills, and difficulty paying medical expenses.