Why It Matters
With housing prices at historic highs, Congress is evaluating methods of how to examine affordability in the market and federal subsidies. A new Congressional Research Service (CRS) report compares two ways of measuring housing affordability: the commonly used ratio approach, which treats housing as unaffordable when costs exceed 30% of household income. A competing method called the residual income approach asks whether income left after housing costs can cover food, transportation, child care, health care, and other necessities.
The conventional standard for measuring housing availability — the 30% method — is currently embedded in the Housing Choice Voucher, public housing, Section 8 project-based rental assistance, and Low-Income Housing Tax Credit programs.
The Big Picture
Using 2023 American Community Survey (ACS) data for non-elderly households, the report found that approximately 53% faced no affordability challenge under either measure, 31.8% faced challenges under both, and 15.2% faced a challenge under only one.
The residual income approach estimated that 43.6% of households, roughly 32.0 million, were shelter poor, compared with 35.1%, roughly 25.8 million, classified as cost burdened under the ratio approach.
The fiscal stakes are significant. Closing the shelter-poverty gap would require $879.2 billion in additional household income, more than three times the $248.9 billion estimated under the ratio approach.
The ratio approach traces to 19th-century research on household expenditures, and the Brooke Amendment to the Housing and Urban Development Act of 1969 capped public-housing rents at 25% of adjusted family income, before the Housing and Community Development Amendments of 1981 set rents at 30% of adjusted family income for all families in public housing and the Section 8 programs.
The divergence between the two measures is sharpest for households with children. The gap between cost-burden and shelter-poverty rates runs 17 to 18 percentage points for households with children, compared with 2.5 to 3.6 points for those without. Single-parent households show the starkest split: 63 percent are cost burdened, while 80 percent are shelter poor.
Shelter poverty exceeded cost burden in all 50 states, though not in Washington, D.C. The gap was widest in Alabama, Mississippi, and West Virginia, each exceeding 20 percentage points, and narrowest in California and Washington state, where it fell below one percentage point.
A sensitivity analysis found that accounting for Supplemental Nutrition Assistance Program benefits, Medicaid, and public transportation narrowed the gap between shelter poverty and cost burden from a range of 5.9 to 8.5 percentage points to a range of 0.7 to 4.6 percentage points.
The Bottom Line
The report finds that major federal housing programs, including Housing Choice Vouchers, public housing, Section 8 project-based rental assistance, and the Low-Income Housing Tax Credit, are built around a 30% of income standard that understates housing affordability challenges for low-income households and households with children. At the same time, it also says that alleviating shelter poverty through housing assistance "may not be feasible" given an estimated $879.2 billion in additional income needed. For households at or below 30% of area median income, the residual-income affordability gap alone reaches $312.1 billion, and 99.9% of them cannot afford any housing payment under that framework. The immediate question for lawmakers is whether supplementary residual-income reporting, short of a full program overhaul, could improve targeting without triggering that cost exposure.
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