Where Housing Costs Are a Burden for Low-Income Renters

The Biden Administration on Monday announced a plan to grow the nation’s affordable housing stock. According to CNN, the new policies aim at leveraging federal funds to encourage zoning changes, increase the construction of multifamily homes and support manufactured housing and housing rehabilitation.

According to a survey of industrialized nations by the OECD, low-income tenants in the U.S. are among those struggling the most with housing costs. Almost half of all low-income renters in the U.S. spend more than 40 percent of their income on housing. This puts the country towards the top of the list of the least affordable housing markets in the OECD together with Spain, the UK and New Zealand as well as Israel, Chile and Finland. 30 percent or one third of income after tax spent on housing is generally considered the maximum amount any renter should pay.

The data refers to private renters as those on the subsidized market are expected not to have their resources overstretched by rent. While the OECD has no comparable figure of how many U.S. residents pay subsidized rent, Department of Housing and Urban Development data suggests that close to 3 percent of Americans benefit from the department’s housing assistance.

The OECD survey was carried out before the pandemic, in the aftermath of which high inflation has seen cost of living, including rents, soar even higher. The data also shows the inability of low-income Americans to buy their own home instead of paying high rents. While this seems counter-intuitive, buying instead of renting is, or at least was, a way out from under the rent burden for low-income people in several OECD countries. In many places with high housing costs, burdensome mortgages are actually less common than burdensome rents – but this could also be due to the fact that fixed mortgage payments keep running for years at the same rates, while rent increases would display in the data more immediately. In the U.S., low-income mortgage holders were still overburdened by their payments in 39 percent of cases, only topped by pricey New Zealand (42.5 percent), Italy (42.1 percent) and Canada (41.4 percent).