Households With Rent Burdens: Impact on Other Spending and Factors Related to the Probability of Having A Rent Burden

Abstract

Analysis of the 1980-1991 Consumer Expenditure Survey showed that 36% of renter households spent more than 30% of after-tax incomes on housing (rent burden), with a generally upward trend from 1982 to 1991. Households with a rent tended to be older, lower income, were more likely to overspend, and had lower budget shares for transportation, food away from home, apparel, entertainment, alcohol, vehicle, reading, cash contributions, insurance and pensions than households without a rent burden. In a multivariate analysis income, household size, being single and larger city size were positively related to the risk of having a rent burden. Housing is a large item in the budgets of renters, and should be considered first in budget planning since housing expenditures are more difficult to adjust than other consumption categories. When rent rises, renters cannot cancel the increased expense simply by using the rental unit less. They may have to cut spending in other consumption categories, or overspend in order to offset the increased cost. The percent of income spent on housing has been used as the standard measure for housing affordability. This measure is the norm for subsidized housing programs because the U.S. Department of Housing and Urban Development (HUD) has used 30% of household income as the standard of housing affordability since 1981 (Fronczek & Savage, 1989). In line with this, HUD defines cost burden as paying more than 30% of one's income for housing (Bogdon, Silver & Turner, 1993). This study follows uses HUD's definition of excess cost burden. A household which spent more than 30% of its income on housing is considered to have a rent in this study. One purpose of this study was to examine the demographic and spending difference between renters spending more than 30% of their after-tax income on housing and those spending less than 30%. Another purpose of this study was to analyze the effects of