Gimme Shelter: A New Take on Housing Affordability

Gimme Shelter: A New Take on Housing Affordability

Is the rent too high? The question is a common one. How do housing experts answer it? Most scholars and public agencies, including OHFA, consider a renter household paying more than 30 percent of its income toward rent and utilities to be experiencing "housing cost burden." This guideline originated in 1981, when Congress passed a law stating that families receiving housing assistance should generally pay 30 percent of their income toward rent. Before that, the guideline was 25 percent, and the Trump administration has proposed increasing it to 35 percent. In other words, these fixed thresholds are somewhat arbitrary and do not necessarily measure what housing cost burden is meant to capture: financial hardship imposed by the range of available housing options relative to income.

Luckily, there is an alternative tool that can potentially provide more insight into this concept of cost burden. The concept of shelter poverty measures whether rent exceeds the renter's ability to pay, given their household income and necessary non-housing expenditures. The latter has traditionally been tricky to define, since how much a household spends on something like transportation varies based on a variety of factors, like where they live and how many people commute. This gap has been bridged by the University of Washington's Self-Sufficiency Standard, which estimates how much a household needs to spend on essentials without relying on public assistance. These numbers are based on the county of residence and the number and age of people living there. Using this self-sufficiency data combined with federal survey records provides a de-identified, random sample of households, which can be used to analyze shelter poverty among renters.

How do the two approaches compare in Ohio? In total, 52 percent of Ohio renter households are experiencing shelter poverty, compared to 46 percent above the traditional cost burden threshold. This suggests that the scope of the issue has been substantially understated. Perhaps more interestingly, this effect is not uniform across the state. Wealthier parts of the state actually have less cost burden than previously reported, while cost burden in more economically distressed areas is much higher.

What does this mean in plain English?

  • Using a more holistic approach to evaluating household expenditures shows struggling areas are much worse off financially than previously thought. In Holmes, Guernsey and Coshocton Counties, rent burden prevalence was understated by 19 percentage points.
  • Conversely, many prosperous communities are even less challenged than they appeared to be under the income threshold approach. In short, this is because some households chose to spend more than 30 percent of their income on housing costs and could afford to do so. This is most dramatic in northern Summit County, where the rent burden rate was overstated by 12 percentage points.
  • Importantly, this implies that, by geography, Ohio renters are experiencing far more inequality in cost burden than previously known.

Another way to think about the data is not just whether someone is paying "too much" in rent, but how much more money a household would need to make in a year to escape cost burden. Here, the disparities between the two different measures become much more dramatic:

  • To ensure no household would have to pay more than 30 percent of their income in rent, Ohio renters would need to make $3.2 billion more annually. Using the Self-Sufficiency Standard, however, this number jumps to $14.9 billion, an increase of 360 percent. Total statewide rent burden is 4.6 times higher than previously calculated.
  • On a per cost burdened renter basis, the corresponding figures are $4,559 and $18,225. Average statewide rent burden as evaluated using the Self-Sufficiency Standard is four times higher than previously calculated.
  • As with rates of rent burden, these disparities are higher in distressed areas—urban and rural alike—and lower in well-off communities.

Together, these results indicate that the financial challenges faced by Ohio's renters far outstrip what prior analysis suggested, highlighting the need to maintain and extend resources dedicated to serving this population and ensure that low-income Ohioans have the tools to achieve self-sufficiency. It should also represent a call for OHFA, other policymakers and Ohio's affordable housing community at large to re-conceptualize issues of rental affordability and housing need throughout the state. This is the central role research and data analysis play in the development of cross-sector solutions and one that the Office of Research and Analytics will continue to play.

You can see what these data look like for your community using the map below: