Should We Reexamine the Classification of Rent Burden?

rent burden classification

The traditional definition of rent burden—paying more than 30% of one’s income on housing—may no longer be adequate due to rising costs of necessities and stagnant wages. It’s time to reexamine this classification, as more people may be at risk of homelessness.

For decades, we have defined rent burden as paying more than 30% of one’s income into housing. The general assumption is that to live comfortably, people need to have 70% of their income dedicated to expenses outside of housing. However, the average cost of necessities like groceries, transportation, clothing, childcare, healthcare, etc., have all increased while wages remain relatively stagnant.

This begs the question: do we need more than 70% of our income after housing to live comfortable lives? If we do, the classification of rent-burden might have to be redefined to fit the modern market. This would effectively mean even more people are at risk of becoming homeless than initially projected.

In an uncertain economy where an unimaginably expensive housing market looms, this might be a question for the void. Still, today, we compared some statistics and spoke with some experts about the state of the economy in hopes of uncovering an answer anyway.

Hyperinflation Gives Way to Astronomical Costs. The Price of Everything Collectively Increased 20%

According to the California Legislature’s Nonpartisan Fiscal Policy Advisor, the overall price of goods has increased 20% since 2020, about 5% more per year. According to data published by Investopedia, this is more than double the inflation rate of previous years, like 2017, when it was 2.1%, or 2014, when it was only .80%. Bloomberg aptly called this the “cost-of-living-squeeze,” and almost everyone is feeling the pinch. 

There are some really good arguments to be made for suggesting that 70% of income being set aside for needs outside of rent is no longer enough. Some of the most noteworthy among them are:

  • Unprecedented Price Increases – According to financial experts, goods that would have cost $100 just a few years ago in 2019 now cost $119. It doesn’t matter which goods they are either. Food prices have shot up 25%. Gas is up 29%. Car insurance is a whopping 33% more expensive, etc.
  • Inflation Has Outpaced Wage Growth – Wage stagnation has been a problem for decades. Still, despite minimal increases in the median wage in recent years, economists claim 60% of worker wages have not kept pace with growing inflation rates.
  • Most Americans Cannot Afford an Emergency – Perhaps the most telling testimonial that works in favor of increasing the classification of rent burden is the fact that more than half of all Americans, 63% to be precise, cannot afford a $500 emergency expense. This means they can only afford to pay their bills if absolutely nothing goes wrong. Car trouble, health issues, household repairs, or even something as simple as locking their keys in the house could spell serious trouble for most American renters. This does seem to suggest that after rent and basic needs, there is little to nothing left to stash away for savings. How likely is it that a $500 or more emergency will arise? Pretty likely.

Experts Claim Overall Affordability Has Changed

In an exclusive interview with Invisible People, Sarah Saadian, the Senior Vice President of Public Policy and Field Organizing at the National Low Income Housing Coalition, conceded that affordability looks different than it did a few years back.

“Over time, that standard of what’s considered affordable has changed,” said the Senior VP, who previously worked as a policy analyst. “There’s nothing in stone that says we can’t take a new look at how to calculate that. So, it’s something to keep in mind.”

While Saadian was open to reexamining the classification of rent burden, she still said the most significant focus should remain on those individuals and families living under extreme rent burden. These renter households pay more than 50% of their salaries in housing, many of whom are very low-income earners. 

“I think the larger issue that we need to focus on is people who need housing assistance and can’t afford it and can’t receive it. So about 10 million households are paying more than half of their income on rent, yet they still can’t get housing assistance,” she explained. 

“And we know that when that happens, they’re at much higher risk of falling behind on rent and facing eviction. And a worse case is becoming homeless. And that’s because when your incomes are so low, and you’re putting so much of it toward housing, any sort of financial shock, a broken-down car, or a couple of missed days of work because you’re sick or your child is sick – that can really cause a household to spiral into a crisis.”

“A lot of the work we do is focused on expanding rental assistance because it’s universally available to everyone who needs it, and we’re treating it more like other safety net programs that are fully funded,” Saadian continued. “And also, we focus on building more housing supply that’s affordable to people with the lowest incomes because too often the homes that we built with federal dollars are still too expensive for people who need housing the most.”

Speaking of extremely low-income earners, another argument must be made: the idea that your income must reach a certain threshold, regardless of how much of it is spent on housing.

For example, 70% of the income from a family making $20,000 per year works out to just a little over $1,100 a month being left over for general expenses. This means that a cost-burdened, extremely low-income family of four would have very little money left after paying rent to do things like:

  • Buy food – $500 per month
  • Buy clothes – $162 per month
  • Put gas in the car – $130 per month
  • Pay for utilities – $488 per month
  • Pay the family’s cellphone bill – $200 per month, etc.

As you can see, this low-income family is already in the red and hasn’t even purchased their necessary expenses. This is presuming they are driving a used car that is not broken down and that they are not paying for childcare, pet care, or health insurance. Even if their rent were $0, they would not have enough left over for basic expenses, typically costing a family of four about $4,000 per month, depending on the city. That’s nearly 4x the amount an extremely low-income family has access to.

Meanwhile, a family of four that has to pay more than 30% of their income on rent (and are therefore rent-burdened) while making $500,000 per year would have roughly $29,000 per month for spending after rent. From this perspective, it’s clear that cost-burden standards should consider salary because the average high-income worker is not feeling the same pinch as a cost-burdened, low-income worker.

But herein lies the bigger conundrum. What about those straddling the line? Could they start to fall through the cracks as the price of living continues to increase drastically?

If Rent Burden Was Defined as Spending More than 25% of Your Income on Housing, This Would Mean Even More People are at Risk of Becoming Homeless

If we were to adjust the definition of rent burden to account for inflation, we would have to add even more renter households to the 22.4 million already classified as rent-burdened and teetering dangerously on the edge of homelessness. We will return this question to the void, but it’s food for thought.

Talk to Your Legislators About how the Affordability Crisis Causes Homelessness

Take a moment to remind your local legislators that the lack of affordable housing is still the leading cause of homelessness and needs to be addressed. Urge them to draft laws that reduce or eliminate rent burden, particularly for low—and middle-income families. Laws like rent control and rent stabilization are phasing out at the time when we need them the most.

Cynthia Griffith

Cynthia Griffith


Cynthia Griffith is a freelance writer dedicated to social justice and environmental issues.

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