March 19, 2019

Exploring Housing Costs and Shelter Poverty

Low-rise garden apartment buildings with porches and balconies adjacent to vegetated open space.At the 2018 APPAM Fall Research Conference, a panel of researchers discussed strategies to study aspects of housing insecurity such as shelter poverty, in which low-income households are at risk of being unable to meet basic needs because of high housing costs.

The study of housing insecurity focuses on a number of topics, including affordability, quality, safety, and residential stability. Without a clear definition of housing insecurity, however, researchers and policymakers must expend precious time and effort choosing an appropriate method for measuring and analyzing evidence of housing insecurity. At the Association for Public Policy Analysis and Management’s 40th annual fall research conference, held November 8–10 in Washington, DC, participants discussed more accurate measures of housing insecurity. One panel, “Investigating Housing Costs and Shelter Poverty: Measurement and Ramifications,” featured Bryan P. Grady of the Ohio Housing Finance Agency, Barry Steffen and Nicole Elsasser Watson of HUD, and Trudi Renwick of the U.S. Census Bureau. Grady, Steffen, and Renwick discussed strategies to more effectively study aspects of housing insecurity such as shelter poverty, in which low-income households are at risk of being unable to meet basic needs because of high housing costs. Watson focused on HUD’s efforts to produce a housing insecurity research module that will create an index of housing insecurity transferable across household surveys.

The Problem With Housing Cost Burden

Housing insecurity is traditionally measured by determining whether a household is cost burdened, meaning that it spends more than 30 percent of its income on housing and utility costs. Grady, however, argued that this definition fails to grasp the totality of housing insecurity. Housing cost burden, said Grady, does not account for the fact that expenses are not scalable to income and can vary based on household makeup and geographic location. Standard measurements also assume that households with lower incomes have proportionately reduced expenses. Grady stated that using the residual income measure of shelter poverty instead of a ratio-based measure such as housing cost burden may provide a more holistic view of housing insecurity.

To accurately measure shelter poverty and housing insecurity, Grady suggested using the self-sufficiency standard — the amount of income necessary to meet basic needs without using public subsidies. Unlike the more traditional income-based ratios used to determine insecurity, the self-sufficiency standard considers expenses unrelated to housing, which allows researchers to account for factors such as geography and household configuration. In his analysis of housing affordability in Ohio, Grady found that the ratio-based measurements severely underestimated housing cost burden in urban and rural low-income areas. The recent rise in housing cost burden has placed even more households at risk of experiencing shelter poverty, added Steffen. Furthermore, although Ohio renters would need only $3.2 billion in additional funds to close the rent gap according to the traditional housing cost burden measure, that gap expands to approximately $15 billion according to the self-sufficiency standard.

Accounting for Amenities

To address the multiple facets of poverty, the U.S. Census Bureau issues a supplemental poverty measure (SPM) that offers a more comprehensive estimate of poverty. Like the self-sufficiency standard described by Grady, SPM accounts for differences in geographic locations. Controversy remains, however, about how to adjust SPM thresholds to account for geographical differences in cost of living. During a 2011 workshop sponsored by the University of Kentucky’s Center for Poverty Research, economists argued that higher prices in certain areas might actually reflect the availability of neighborhood amenities. Therefore, says Renwick, adjusting the SPM without factoring in area amenities may underestimate the amount of government assistance in high-cost areas if cost differences are impacted by differences in amenities. No commonly accepted methodology on how to include amenities in the poverty measure currently exists, noted Renwick, but many argue that amenities must be included for the measure to be truly comprehensive. Because this issue is so important, future research from the U.S. Census Bureau will continue to analyze the best mechanisms for incorporating amenities into the SPM.

Toward a National Housing Insecurity Index

Although concepts such as the SPM and shelter poverty help provide a more detailed understanding of housing insecurity and poverty in general, researchers still lack unified measures and definitions. Through a partnership with the American Housing Survey, HUD is proposing a new research module to address this issue by creating a housing insecurity index. The new index, said Watson, will be transferable across household surveys and bring a powerful tool to the policy development world. The index will provide a validated method for analyzing household-level survey scores across a housing insecurity scale. Additional scale analysis will examine the possibility of using a single dimension of housing insecurity with which to score households. The index will also help researchers develop a more comprehensive body of knowledge of housing needs by enhancing the quality and consistency of relevant research. Watson added that the index includes a series of contextual questions about stress and basic needs tradeoffs that will enable researchers to explore the relationship between housing insecurity and other hardships such as shelter poverty. Watson hopes that after additional analysis is completed, this new index will be available for federal agencies and outside researchers to further study housing insecurity.

 
 
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