Rent-based-on-income ‘TRUE affordability’ has moved UP over time to 30% of income, not DOWN to that figure from some some higher value. The benchmark of true affordability in the United States was initially considered to be 25%. This included people who lived in public housing. In the 1980’s, the standard moved to 30%.
Beginning in the 1990’s the term ‘affordable housing’ has been progressively hijacked by the housing development industry and its government supporters to mean basically nothing at all. It has been reduced to the role of advertising gimmick such as quiet enclave to describe a new housing development beside the roar of busy roads. Not only quiet, but affordable!!!
One way of attempting to salvage an important rental housing term has been to modify it. Calling rent ‘TRULY affordable’ is one way to signal that it refers to a 30% baseline, above which renters are unreasonably stressed.
On one hand, if it were possible, public housing agencies that use this benchmark have every reason to wish this figure to be revised higher, given the hopeless challenge of managing and maintaining public housing on current revenue from rent.
On the other, hand, with both renters AND owners today face housing costs as much as 40%, 50%, 60% of household income. Those who struggle to pay these percentages — especially given the rising costs of food, health care, etc. — are slipping towards a real risk of eviction, foreclosure and homelessness.
For those with the lowest incomes, the particular value of 30% — however much it may be accepted as a benchmark — doesn’t reflect an amount that results in stable housing.
Instead the accepted benchmark of truly affordable rent needs to be revised DOWNWARDS. Here’s a call for just that from a less affluent region of New York State, at FingerLakes1.com: Affordable housing formula is broken: 28% of New York renters are ‘extremely low-income’
The Joint Center for Housing Studies at Harvard has also looked into the 30% standard for affordability. The researchers noted:
“Consider the 5 million US households with incomes of $7,500 a year or less, for whom paying 30 percent of income on housing would leave less than $438 each month to spend on all other needs such as food, clothing, health care, and transportation.”
The research team tried considering affordability based on residual income. This looks at what households have left over after paying for housing and whether that amount is enough to pay for basic necessities. The residual income method does a much better job of showing the financial stress of a household earning $7,500, compared with one earning $135,000. The household with the higher income will have a much better chance of paying for essentials, even if the amount it is paying for housing is more than 30% of income.
The full study is posted at the Joint Center for Housing Studies: Measuring Housing Affordability: Assessing the 30 Percent of Income Standard
