![]() A family may choose to live in a poor-quality home, in a crime-ridden area, or a long distance from work opportunities to reduce housing costs. ![]() If 50 percent of the family’s income is dedicated to rent, the family has only about $200 per week left to cover all other basic expenditures, including food, clothing, medical costs, and transportation.Īnother concern about the share of income measure is that it does not take into account the tradeoffs families make to reduce housing costs. Consider a very low-income family in New York City that earns approximately $22,100 a year, or 30 percent of the area median income according to the Furman Center. In addition, the share of income measure does not consider cost-of-living differences in areas where housing is expensive. Thus, a household with children that spends 50 percent of its income on housing might be cost burdened, whereas a single adult who earns the same salary and spends the same percentage of income on housing might not be. For example, families with children spend more on clothing, food, and medical bills than do single adults. In discussing the rental affordability measurement to Business Week, David Bieri of the University of Michigan states that the 30-percent rule “ essentially an arbitrary number.” One of the arguments against the share of income approach is that different households earning the same annual income spend considerably different amounts of money on basic necessities. Representative Barney Frank recounted that “ said originally that the poorest of the poor who get housing through various public programs shouldn’t be expected to pay more than 25 percent of their income for housing, precisely because they have so little.” Congress raised the cap to 30 percent in 1981. The Brooke Amendment, which was passed in 1969 as a response to rent increases and complaints about services in public housing, capped public housing rent at 25 percent of a resident’s income. He and then-Senator Walter Mondale coauthored the 1968 Fair Housing Act, which prohibits housing discrimination on the basis of race. The 30-percent rule for measuring affordability can be traced back to an amendment passed in 1969 by Senator Edward Brooke, the country's first popularly elected African American senator and a vocal advocate of affordable housing. But if your income is $20,000 a year, it will be hard to make ends meet if you’re paying 30 percent of your income on rent.”Īs living costs increase, does the 30 percent rule accurately measure rental affordability? Frank Nothaft, chief economist at Freddie Mac, is quoted in the article as saying, “If your income is $500,000 a year, you can pay 40 percent and still have money left. A recent Business Week article, however, argues that the 30-percent rule is “nearly useless.” The authors suggest that calculating housing cost burden using only income ratios oversimplifies the issue of housing affordability. The 30-percent rule - that a household should spend no more than 30 percent of its income on housing costs - has long been accepted in academic circles and is often included in blogs and websites on family budgeting. HUD defines cost-burdened families as those “who pay more than 30 percent of their income for housing” and “may have difficulty affording necessities such as food, clothing, transportation, and medical care.” Severe rent burden is defined as paying more than 50 percent of one’s income on rent. This interactive map shows that people living along the east and west coasts and in urban areas bear the greatest cost burdens. In July 2014, the Joint Center for Housing Studies of Harvard University released a study finding that nearly half of all renter households in the United States were cost burdened in 2012. How much of your income should you set aside for rent? With the cost of housing on the rise, researchers are reexamining the 30-percent rule of thumb for measuring rental burden. In cities like New York, households often face considerable rental burdens and high costs of living. Rental Burdens: Rethinking Affordability Measures
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