The escalating crisis of cost-burdened households
By Clarence Hightower, Ph.D.
The Anti-Poverty Soldier
ST. PAUL, Minn. (April 21, 2016) — On a handful of occasions during the life of this column, I have referenced the serious, yet often overlooked subject of cost-burdened households. A cost-burdened household is defined as a household that spends more than 30 percent of its total income on housing costs.
While housing traditionally represents the single biggest cost item in any household, regardless of income, the increasing number of American households now classified as cost-burdened is startling. Over the past decade, the percentage of cost-burdened households, particularly among low-income residents, has steadily risen each year. While this is true for all income levels, no one has been more affected by this trend than the lower-third of all American households that rent.
In 2014, according to the Pew Charitable Trust, approximately one-half of this group was not only considered cost-burdened, but spent nearly 50 percent of its total household income on rent. Furthermore, the number of low-income households that were categorized as cost-burdened in 2014 increased by nearly 20 percent in 12 months and by almost 100% since 2004. Pew also noted that actual housing costs for low-income Americans have increased by more than 50 percent since 1996, a significantly greater increase than those with income levels in the middle third or top third.
While the Pew data focusses in on national trends, the current situation in Minnesota is equally disturbing, particularly when you cut through the most general data. It is true, that both the entire Twin Cities metro area (29.9 percent) and the state as a whole (28.3 percent) fall below the national rate (34.4 percent) of cost-burdened households. In fact, out of the 25 largest metropolitan areas in the nation, the Twin Cities ranks second only to Pittsburgh for having the lowest percentages of cost-burdened households. Nonetheless, when measured individually, both Hennepin and Ramsey counties don’t fare as well.
For their part, Hennepin and Ramsey rank 84th and 86th respectively out of 87 Minnesota counties whose residents pay more than 30 percent of their income on housing. In addition, nearly 40 percent of all households within the central cities of Minneapolis and St. Paul are classified as cost burdened. And for low-income residents throughout the seven-county Twin Cities metro, the situation is more than twice as bad.
According to the US Census Bureau’s American Community Survey, Twin Cities metro households in the lowest economic tier (those with incomes under $20,000) spent a whopping 87.1 percent of their income on housing. Likewise, those making between $20,000 and $35,000 spend nearly 70 percent of their earnings on housing while Twin Cities households earning between $35,000 and $50,000 put approximately 44 percent of their income toward housing costs.
The scourge of cost-burdened households is also clear when viewed along racial and ethnic lines. For example, from 2008 to 2012, nearly two-thirds of African American households in the Twin Cities metro were classified as cost-burdened, the highest incidence of any racial or ethnic group. Immigrant households from Africa were next at approximately 55 percent and the ratio of Native American households spending more than 30 percent of their income on housing was 52 percent. Nearly 50 percent of Hispanic and Southeast Asian households were considered cost-burdened as well.
Perhaps the Amherst H. Wilder Foundation’s Wilder Research initiative best puts the cost-burdened household crisis in perspective when it writes that:
People whose housing costs exceed this threshold of affordability are likely to struggle to pay for other basic needs, forcing difficult trade-offs. Individuals and families who are cost-burdened may drop health care coverage, select less expensive child care arrangements, or skip meals to save on costs, which may result in poorer outcomes in other areas of well-being.
The precipitous increase the number of cost-burdened households is putting hundreds of thousands of Minnesotans and tens of millions Americans at risk for financial disaster, homelessness, and other calamities.
If real wages continue to remain flat or fall, while housing, healthcare, food, and other costs of living keep rising, when does the bough break? And what do we do then? We must continue to work to eliminate poverty and its burdens before it becomes too late for too many of us.
Clarence Hightower is the executive director of Community Action Partnership of Ramsey & Washington Counties. Dr. Hightower holds a Ph.D. in urban higher education from Jackson State University. He welcomes reader responses to 450 Syndicate Street North, St. Paul, MN 55104.