More money, better conditions

That’s the conclusion of a recent article by the Minneapolis Federal Reserve research team.

In a recent paper co-written with researchers from the University of Wisconsin-Madison and the University of Illinois-Chicago and initially published by the Minneapolis Fed, we measured the evolution of housing quality for low-income households over the past several decades across the United States. We found broad and generally large increases in housing quality and smaller but still important increases in living space.

So, it’s not surprising that the data show fewer low-income people living in squalor.

I like this part too. It’s a great example of how headlines can suggest misleading information. Although gross rents have increase, they have hit people’s monthly budgets at a much lower increase.

As housing quality and quantity are getting better, how much more are households paying for it? According to the AHS, for below-median-income Twin Cities area residents, real monthly spending on housing increased by 32 percent from 1998 to 2021, from $1,008 to $1,333. Around half of below-median-income Twin Cities households remain housing-cost-burdened (spending 30 percent or more of their income on housing) and a quarter remain severely housing-cost-burdened (spending 50 percent or more of their income on housing). For many families that spend a large fraction of their income on housing, findings about general housing improvements may be tough to appreciate.

However, our analysis indicates that greater housing spending reflects not only higher housing prices but also Twin Cities area residents’ ability to afford housing that is larger and nicer. Overall, the average housing budget share only increased by 4 percentage points from 1998 to 2021, from 36 percent to 40 percent of income, which indicates that most of the growth in spending on housing is driven by higher incomes, better quality, and more spacious homes, as opposed to needing to allocate a greater share of income for the same, unimproved housing.

Some combination of private money, public efforts, and community involvement is improving living standards for those with lower incomes. And it’s not clear at all that the burden is falling on the most vulnerable.