Risk Factors for Child Homelessness: Housing Market Factors

Housing market factors reflect the shortage of affordable housing and the growing imbalance between housing costs and the resources of low-income families – and partly explain why increasing numbers of families are joining the ranks of the homeless.

What We Know about Housing and Income

• In every state in America, housing costs outpace wages.⁹⁸
• A family with one-full time worker earning minimum wage cannot afford the HUD established Fair Market Rent (FMR) for a two-bedroom apartment anywhere in the United States.⁹⁹
• A full-time worker earning the average renter wage cannot afford a two-bedroom apartment at the FMR almost anywhere in the United States.¹⁰⁰
• In the vast majority of states, the hourly wage needed to afford the rent for a two-bedroom apartment is 2-3 times the minimum wage.¹⁰¹
• Available housing vouchers, a potential solution, meet only one-quarter of the need in America.¹⁰²

The housing market factor reflects how much housing is available for families at the low end of the economic ladder. The two indicators comprising this domain are extreme or worst case housing need (defined by the U.S. Department of Housing and Urban Development [HUD] as paying 50% or more of income for rent or living in substandard housing and experiencing a housing foreclosure).⁹² Worst case housing need is a strong predictor of family homelessness because it includes a subgroup that may be one unexpected expense away from eviction. Similarly, foreclosure rates are an indicator of diminished housing stock. In many locales, foreclosures also lead to the eviction of vulnerable tenants and are associated with rising rates of homelessness.

Home Foreclosures in the First Half of 2008

Housing Market Factors and Child Homelessness

Housing market factors reflect the shortage of affordable housing and the growing imbalance between housing costs and the resources of low-income families – and partly explain why increasing numbers of families are joining the ranks of the homeless.

As the gap between rich and poor has increased, the purchasing power of low-income families has plummeted. According to Robert Greenstein of the Center for Budget and Policy Priorities, “income inequality in the United States has risen to historically high levels…and has been increasing for more than 30 years.”⁹³ The largest gains have been accrued among the wealthiest 1%. Between 1979 and 2005, the income of the richest Americans more than tripled, rising 228% ($76,500) per household, while the income of the bottom fifth rose only 6% ($900).⁹⁴ The impact of this widening gap on those at the bottom of the income scale is devastating. Many of these families no longer have the purchasing power to sustain their households. Basics like food, clothing, child care, transportation, and housing are often out of reach.

Across the country, housing costs have soared as the supply of affordable housing units has shrunk.⁹⁵ The declining number of low-income housing units has compounded the dwindling purchasing power of families at the bottom. Between 2003 and 2005, 4.2% of units for extremely low-income renters and 4.9% of units for very low-income renters disappeared from the market. HUD’s report on affordable housing shows that affordable rental units are frequently inhabited by higher income renters – further shrinking the housing supply for low-income renters. The amount of vacant affordable housing units for extremely low-income renters shrunk by 400,000 (13%) in 2005.

As housing costs have increased, millions of Americans must choose between housing and other necessities. More and more families are paying more than one-third of their incomes for housing – the proportion at which housing costs are considered affordable. For these “cost-burdened” families, other essentials such as food, transportation, medical care, and child care often lie out of reach. About six million American families must devote 50% or more of their income to housing and/or live in substandard housing.⁹⁶ These families with “worst case housing needs” carry the highest risk of becoming homeless.

Increasing foreclosure rates are leaving more families homeless than ever before – and the numbers are growing. The current economic downturn, especially housing foreclosures, has created unprecedented increases in family homelessness. In fact, foreclosures rose 70% between the third quarters of 2007 and 2008. The impact on children is startling. More than 150 school districts reported at least a 50% increase in the numbers of identified homeless children from the 2006-2007 school year to 2007-2008. Within the first three months of the 2008-2009 school year, 177 school districts had already served the same number or more homeless students than they served during the entire previous school year.⁹⁷

Housing assistance programs have been unable to close the gap between the supply and demand for affordable housing. The dual problem of declining housing stock and increasing rents for existing housing has been exacerbated by the failure of housing assistance programs to keep pace with the need. In 2002, HUD’s budget was less than half of what it was in the late 1970s in real dollars. Construction and renovation of public housing complexes were all but eliminated in recent years. Vouchers, originally designed to bridge the gap between income and rent, have become the primary form of housing assistance – yet, three out of four eligible households receive no federal housing assistance. Because of the high demand for housing assistance and the backlog of individuals on long waiting lists, some agencies have stopped taking new applications for vouchers altogether. In many areas with tight rental vacancy rates, families allocated Section 8 vouchers are unable to find landlords willing to rent to them under the program rules. Many lose their chance to become adequately housed.

Children and Severe Housing Burden