Rent for the Poor Really Is Too High

https://www.bloomberg.com/view/articles/2017-12-27/rent-for-the-poor-really-is-too-high

by Noah Smith
December 27, 2017

Are poor Americans doing better than they used to, or worse? It’s hard to know, because so many important things in life -- social status, emotional health, human relationships -- can’t be measured. But in purely material terms, many things have improved.

Homelessness is down. Government assistance to families with children has lowered the official child poverty rate. Hunger has fallen as well. Though the country doesn’t do a great job at providing the poor with health care, things have improved marginally since the Affordable Care Act went into effect. What’s more, most of the poor now possess items that you would find in most middle-class households; according to a 2011 Census report, 53 percent of households in the lowest income quintile have a computer, 65 percent have a clothes dryer, and 38 percent have a washer, dryer, refrigerator, stove, dishwasher and a telephone.

However, there is at least one way in which poor American families are being increasingly squeezed -- the rent. A new research note from the Federal Reserve Board’s Jeff Larrimore and Jenny Schuetz of the Brookings Institution shows a combination of rising rents and falling incomes among the poorest fifth of households.

Though a substantial number of Americans of all income groups are homeowners, poor Americans are more likely to rent:

In real terms, the rent paid by low-income households has risen modestly -- about 9 percent. Meanwhile, real income for the bottom fifth fell by about the same amount. Squeezed between smaller paychecks and higher rents, the poor have less and less money each month to spend.

Larimore and Schuetz estimate that poor American households pay more than 55 percent of their earnings in rent, compared with less than 30 percent for households in the second-lowest quintile. Despite much public outcry over rising rents in the U. S., most non-poor households are still able to afford shelter without a severe economic burden.

More money spent on rent means less for everything else. Larimore and Schuetz find that the average household in the bottom fifth has only $476 to spend every month after paying rent:

This is down from about $600 a month at the turn of the century, in inflation-adjusted terms.

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But as Schuetz notes, those big rent burdens harm poor households in ways not reflected in their cash spending. When you pay more than half of your income in rent, even a small or temporary dip in earning can be enough to put you out on the street.

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Small wonder, then, that lack of affordable housing leaves permanent scars on children who experience it. Having a secure place to sleep is one of the most basic human needs -- it has not changed since the first caveman crawled under a rock to escape the rain.

So how can the U.S. solve the housing problem for its poorer citizens?

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