What Happened?
You could spend less than 30 percent of your paycheck on rent and still struggle to pay for groceries. The Congressional Research Service (CRS), the nonpartisan research arm of Congress, put out a report called Measuring Housing Affordability that compares two ways of counting who really struggles to pay for a place to live. The usual yardstick says you're "cost-burdened" if your rent or mortgage takes up more than 30 percent of your income. The other approach, called residual income, asks a more down-to-earth question: once your housing is paid for, is there enough left over for food, getting around, health care, and child care?
Why Does it Matter to Me?
That 30 percent rule is more than a rule of thumb, because the CRS report says it's built into major federal housing help, including Housing Choice Vouchers, public housing, Section 8 project-based rental assistance, and the Low-Income Housing Tax Credit. That 30 percent figure dates to the Housing and Community Development Amendments of 1981, which set rents at 30 percent of adjusted family income for all families in public housing and the Section 8 programs. Among households that aren't elderly, the residual-income approach counted about 43.6 percent, or roughly 32 million households, as "shelter poor," while the 30 percent rule flagged about 35.1 percent, or roughly 25.8 million households, as cost burdened.
The gap between the two is biggest for families with children. For single-parent households, 63 percent are cost-burdened under the 30 percent rule, but 80 percent are shelter poor once you look at what's left after housing costs.
Both Sides, Now
The report estimates it would take $879.2 billion in extra household income to close the shelter-poverty gap, which is more than three times the $248.9 billion the 30 percent approach comes up with.
Because of that price tag, the report says helping people out of shelter poverty through housing assistance "may not be feasible." Critics say the 30 percent rule can hide how hard housing costs really hit people. A Legis1 analysis of the report says the big question for lawmakers is whether they could add residual-income numbers to their reporting, without overhauling whole programs, to better target help without running up the higher costs tied to closing the shelter-poverty gap.
What Happens Next?
The report puts the residual-income gap for the lowest-income households, those at or below 30 percent of their area's median income, at $312.1 billion. Under the residual-income approach, 99.9 percent of those households couldn't afford to pay anything toward housing.
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