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When Is a House a Burden?

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There is a term economists use when describing the affordability of housing: house burdened. Technically someone is house burdened when they spend more than 30 percent of their pre-tax income on housing. This distinction is important because it is used as a way to qualify candidates for affordable housing. It also often sets the upper limit for what many affordable housing buildings can charge.

Economists agree that it is dangerous to have lower income individuals paying more than 30 percent of their income to housing. But not everyone agrees with using this metric across the board. The argument against using 30 percent of income as a standard definition of housing burdened is that the burden changes with income. Frank Nothaft, Chief Economist at Freddie Mac, is quoted as saying, “If your income is $500,000 a year, you can pay 40 percent and still have money left. But if your income is $20,000 a year, it will be hard to make ends meet if you’re paying 30 percent of your income on rent.” 

The issue is that many states use the number of people that are housing burdened as a way to understand what measures need to be taken to help make housing more affordable. Looking only at the number of people that are house burdened doesn’t take into account the toll others have to pay to live in houses that they can afford, like unsafe living conditions or exorbitant commutes. It also groups people who voluntarily live above their means with those that have no choice but to do so. 

Definitions aside, I think there is value in understanding how much burden someone’s house puts on them. It shows just how far people will stretch their budgets to cover dwelling costs. It also takes into consideration not just renters but homeowners as well, who can sometimes be forgotten in the affordable housing conversation. Because unaffordable housing spares no one. It affects everything about our lives, from the jobs we work, to the places we live, to the size of our families. 

We have such a massive need for affordable housing that we will need to be very precise in where we incentivize it. That is why we might want to be a little more calculated than just using the house burdened metric. In some places more housing would improve lives, reduce car reliance, and help upward mobility. In others it would simply make it a little less expensive to voluntarily pay more than is recommended for a home. No matter how much we think people will want to do the right thing and allow more housing to be built for others, NIMBYism is not going anywhere. If we decide to ram unwanted developments into communities that don’t really need more housing, it will only make it harder to build more in the future. 



Here is an interactive map built by Harvard that shows the percentage of people that are housing burdened across the country. 

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