More than sixty years after President Franklin Delano Roosevelt made “freedom from want” one of the “four freedoms” he sought to guarantee to families worldwide, one important component of Roosevelt’s vision—affordable housing—is further and further away for many low-income families. It’s well-known that the gradually unfolding foreclosure crisis of the past half-decade put homeownership out of reach for millions of American families. But as a new study from Harvard’s Joint Center for Housing Studies (JCHS) shows, many of these families have found that shifting from homeownership to renting has hardly eased the burden of housing costs. The study, America’s Rental Housing: Evolving Markets and Needs, finds that half of all renters nationwide are now paying more than 30 percent of their incomes on rent.
This is significant because housing experts have traditionally viewed the 30-percent-of-income threshold as the upper limit on affordable housing costs—and because the share of American renters paying burdensomely high rents, by this measure, grew faster over the past decade than at any time in the past half century. In 1960, JCHS finds, the share of renter households paying more than 30 percent of their income was 22 percent. In 2000, that share had risen to 38 percent, and in the decade that followed it jumped to 50 percent.
The JCHS measure breaks out families whose rental costs are “moderate burdens” (30 to 50 percent of income) and “severe burdens” (more than 50 percent of income). Disturbingly, the last decade’s jump in unaffordable rents was driven primarily by those with “severe” rental costs. An astonishing 27 percent of American rental households now spend more than half their income on rent alone, up sharply from 19 percent at the turn of the century.
But as a September 2013 ITEP report notes, an increasing number of state tax systems have a straightforward mechanism in place, the property tax “circuit breaker” credit, that can be tailored to reduce the burden of rental housing cost for families. Circuit breakers are designed to prevent housing costs from exceeding some “excessive” share of income, and nearly half of the states now offer renters at least a small tax credit to keep their rental costs below these excessive levels. Recent expansions in renter tax breaks in Minnesota and the District of Columbia, described in our September report, show that even in a fiscally challenging environment these relatively inexpensive tax credits can be achievable for states.
In fact, circuit breakers administered by state governments may be the most attainable policy solution going forward for mitigating the excessive rental housing costs that millions of low-income families currently face. This is because, as the JCHS report shows, direct rental subsidies have actually been provided to fewer and fewer rent-challenged families even as rental costs have soared. The share of eligible households receiving rental subsidies fell from 27 to 23.8 percent during the past five years alone. In other words, state circuit breakers may be the last backstop for near-poverty families facing severe housing costs.