Report Looks at Severity of Rent Burden on Low-Income Families

An article by Jeff Larrimore and Jenny Schuetz recently published by the Federal Reserve, Assessing the Severity of Rent Burden on Low-Income Families, found that housing costs are a severe financial burden to many low-income families and that households that have little income left after paying rent may not be able to afford other necessities, such as food, clothes, health care, and transportation.

To assess the rent burden on families, the authors analyzed housing expenditures of renters using the American Community Survey (ACS) Public Use Microdata Sample (PUMS). And consistent with HUD, they defined "rent burdened" as spending more than 30 percent of income on housing and "severely rent burdened" as more than 50 percent. And to determine the sufficiency of income left after paying rent, the authors used the non-housing portion of the Supplemental Poverty Measure (SPM) thresholds. In 2015, the SPM estimated that a family of four on the border of poverty would have needed just under $1,400 per month to cover non-housing expenses. The poorest 20 percent of renters, however, had a median income of $476 left over after paying the rent. Almost 75 percent of the poorest renters fell short of the $1,400 threshold, but the report did not take into account certain benefits, like tax credits, that mitigate some of this shortfall.

The report concluded that rent burdens have increased over the past 15 years, due to both increasing rents and decreasing incomes. Prior research has shown that households who spent large shares of their income on rent or other housing expenditures have lower economic well-being. These rent burdens are a potential source of stress and financial instability to households, particularly for low-income families with children.