Cost burdened is the catchphrase of the day in housing. Over the last couple of years it has popped up everywhere. Articles posted on all sorts of sites use the phrase without specifics on how they came up with all their charts and graphs. Smart Asset was good enough to describe its methodology.
Data and Methodology
SmartAsset used Census Bureau data to determine the most and least severely housing cost-burdened cities. This data, which we found for 126 cities, breaks down residents into the following brackets based on the percentage of the total household income they are spending on housing: less than 20%, 20% to 24.9%, 25% to 29.9%, 30% to 34.9%, 35% to 39.9%, 40% to 49.9% and 50%. The data also lists the total number of households.
We took the number of households in each city paying more than 50% of their income on housing and divided it by the total number of households in that city in order to come up with the percentage of households that are severely housing cost-burdened. We then ranked each city based on this percentage. We also calculated the percentage of households in each city paying between 30% and 50% of their income on housing, but this did not impact the ranking.
Data comes from the U.S. Census Bureau 2017 1-year American Community SurveyMost and Least Severely Housing Cost-Burdened Cities (smartasset.com)
You can find more about the American Community Survey here. But I’m pretty sure the information about housing expenses is self-reported by the three and half million who receive the request.
As you do with ranking lists, I checked out my own community (childhood home of Senator Klobuchar no less) to see how we stacked up in the cost burdened arena. According to an extremely well regarded source of data and information to politicians and local officials, half of all residents of Plymouth, Minnesota are cost burdened. Seriously?
I’m not sure how this could be true for one of the more affluent parts of the western suburban Minneapolis-St. Paul metro area. So I checked another affluent area on the St. Paul side, Mendota Heights. Here it is reported that 75.4% of homeowners are cost burdened. Clearly there is an implementation problem with use of the data meant to determine those in need. More alarmingly, there it sits in bold bar graphs given to lawmakers and policy people.
But even if folks choose to pay thirty or even forty percent of their monthly cashflow for housing, who is the Census Bureau or the American Survey or HUD to say that it is too much? Consider these three scenarios.
- I choose to live within blocks of my parents, even though their neighborhood is a little expensive. My parents are able to provide fulltime daycare for my toddler as well as before and after school care for my two elementary school children. Living in their neighborhood saves our family upwards of $2500/month.
- I choose to live in the city which is noticeably more expensive than some first ring suburbs. This location allows me to take mass transit to work, shop and recreate. It’s easy and cheap and I don’t need a car. Between insurance, a loan payment and gas, I save $400-$500 a month.
- I chose to live near my congregation despite the monthly rent being high in relation to my fixed retirement income. My apartment, however, is near my church and the fellowship is such a big part of my life. I am able to share transit to and from my doctor’s office which is close-by. Plus I feel safe.
(For some back of the napkin, points of reference, average rent in Plymouth is $1300. An income that is considered non-burdened (28%) is 4643$/mo. An individual is considered cost burdened (30%) at 4333/mo in income. A difference of $310. )
Evaluating housing based solely on monetary income and rent is grossly insufficient. Consumer housing choices are influenced -think back to your own choices- by all the services found in various neighborhoods. Each of these scenarios show how access to family help, transit infrastructure, and religious communities contribute people’s home economics.
Not only is the present methodology, (which is being projected in stereo as if on a national housing agenda of some sort) yielding reports declaring the poor rich as burdened, I argue the use of pecuniary measures, as the sole means of evaluating quality of housing, is starkly erroneous. If a ratio of rent to income is used (as it has been) as the primary driver in decision making, than less advantaged people will always be pushed into the least expensive rental markets. Surprising to no one is the market reality that these neighborhoods are lacking in support structures.