off the charts
POLICY INSIGHT
BEYOND THE NUMBERS

Surging Rent and Utility Costs Make Need for Housing Vouchers More Urgent

Rent and utility prices have risen sharply in recent months, adding to the difficulties many low-income people face paying their bills and keeping a roof over their heads. These higher costs add urgency to proposals to provide more Housing Choice Vouchers. The voucher program is highly effective at helping people with low incomes afford housing and is the federal housing program best suited to deliver large-scale assistance to renters during the current cost surge. Due to insufficient funding, however, vouchers and other federal rental assistance currently only reach about 1 in 4 households who qualify for assistance.  

Rents have long been higher than many people can afford, but rent increases accelerated sharply beginning in the summer of 2021 as the supply of available units tightened. By February 2022 rents for newly leased units were 17 percent higher than a year earlier, according to one national rent index, with even larger increases reported in some cities.

This surge isn’t fully reflected yet in Consumer Price Index (CPI) inflation data, which show rents rising by 4.2 percent in the 12 months through February 2022. That’s mainly because the CPI uses an average of rents paid by renters in a survey sample whether or not they recently leased their unit. But higher market rents generally don’t affect current tenants until their leases come up for renewal (although this would not delay increases for tenants renting units on a month-to-month basis). Each month, more leases will turn over and more renters will see their monthly expenses rise sharply as a result.

Most renters must pay some or all of their utility bills directly each month in addition to paying their rent. As rents have risen, renters have also been hit by rapidly rising utility bills. In the 12 months through February, prices for residential fuel and utilities rose 11.0 percent, with especially abrupt increases for heating oil (43.6 percent) and utility gas (23.8 percent). Many analysts believe there is a substantial risk that energy prices will continue to rise due to the war in Ukraine and other factors; such increases would likely translate into even higher utility bills for struggling renters.

When rent and utility costs rise rapidly, people with the lowest incomes — such as low-wage workers or seniors and people with disabilities who have low fixed incomes — face tradeoffs and hardship that are far more severe than for people further up the income scale. In 2019, more than 23 million people in the United States lived in renter households that paid over half their incomes for housing, and the bulk of those households had incomes around or below the poverty line. Often, these renters have only a few hundred dollars a month left over for essential non-housing expenses like food and health care, so rising rent and utility costs further squeeze their already limited spending. 

Renters who can’t pay the higher costs will experience utility cutoffs and evictions, forcing some to live in overcrowded housing, in shelters, or on the streets. The resources available to help people in these situations fall far short of meeting the need. Many local homelessness systems are stretched to capacity. Emergency rental assistance funded through COVID-19 relief legislation helped about 4.3 million renter households meet their needs through January 2022, but states and localities are beginning to exhaust those funds. There are long waiting lists for longer-term rental assistance programs such as housing vouchers, with the result that even the small share of eligible people who are able to receive vouchers must first wait almost two and a half years on average. And while recently enacted 2022 funding legislation will fund about 30,000 new vouchers, this will only be enough to assist a small fraction of those in need.

Providing more housing vouchers could help many additional renters cope with higher costs and hold on to their homes. Housing vouchers are well-designed for this purpose, because they cover the gap between 30 percent of the household’s income and typical rent and utility costs in the local market. Research shows that vouchers reduce homelessness, overcrowding, and housing instability among people with incomes around or below the poverty line. While some have suggested that providing vouchers to more people in need would drive rents up by raising demand for housing, research on previous voucher expansions shows that new vouchers are unlikely to have more than a minimal impact on market rents.

Additional vouchers should be accompanied by measures to ease pressure on housing costs by building more homes, but this won’t happen quickly enough to help people who are having difficulty paying their rent and utility bills right now. Federal policymakers should provide more funds to develop affordable housing and state and local governments should ease barriers that limit construction (such as large minimum lot sizes and prohibitions on multifamily housing). But even if these steps were taken immediately, they would take years to substantially ease housing costs, and on their own aren’t likely to reduce rents enough to make them affordable to people with incomes around or below the poverty line. Vouchers could deliver assistance far more quickly and enable even the lowest-income families to afford stable housing.

will_fischer-500x500.jpg

Senior Director for Housing Policy and Research