Senior Research Analyst
The pending Republican tax bill threatens to deeply undermine programs that help low-income Americans keep a roof over their heads, just as a new report shows that the number of struggling renters will likely remain high in the coming years. Nearly a third of new jobs in the coming decade will be low-wage jobs, which typically employ workers who struggle to pay rent, an analysis from Harvard’s Joint Center for Housing Studies (JCHS) finds.
The Bureau of Labor Statistics predicts that the number of low-wage jobs will keep growing in the coming years, JCHS notes. Most renters working in three of the five industries projected to add the most jobs over the next decade (health care support, food preparation, and personal care and service jobs) are cost burdened — that is, they pay over 30 percent of their income for housing (the federal standard of affordability). These employment trends, along with demographic changes that will increase the number of millennial, baby boomer, and non-white renters, could increase the number of renters with cost burdens.
Renter income is already failing to keep up with rising housing costs, Census data show. Even as incomes have grown and poverty has fallen over the last two years — signs of unprecedented progress over a two-year period — most renters’ inflation-adjusted incomes haven’t recovered from the 2001 recession. The gap between median renter income and median rent shrank between 2015 and 2016, largely thanks to strong income growth. However, housing costs, including rent and utilities, have risen sharply in recent years and continued growing in 2016. Since 2001, the rise in median rent has outpaced the change in median renter income by 12 percentage points. (See chart.)
What’s more, some of the improvements in renter income are due to high-income households switching from owning to renting their homes in recent years, rather than strong income growth among low- and moderate-income households alone. Over 70 percent of low-income renter households are cost burdened, even though most of these households work. The typical cost-burdened low-income working household earned $22,000 in 2015, meaning they could only afford to pay $550 a month for rent and utilities without exceeding 30 percent of their income.
In the midst of these housing trends, the Republican tax bill weakens critical tax subsidies for affordable housing development and lays the groundwork for harsh cuts to vital rental assistance programs. That is, the bill would provide costly tax cuts that are heavily skewed toward wealthy households and profitable corporations. And by boosting budget deficits, it would pave the way for program cuts down the road that mostly affect low- and middle-income families.
Federal rental assistance is among the programs at risk of deep cuts. Such assistance is critical to low-income renters, but 3 out of 4 needy renters don’t receive it due to limited funding. And as we wrote recently, the President and Congress must significantly increase funding for Housing Choice Vouchers in 2018 to prevent cuts in the number of families assisted. Policymakers should protect existing aid and expand targeted assistance for homeless veterans, families with children that are involved with child welfare agencies, and other groups.