Recent reporting from Zillow Research found that communities where average rent exceeds one third of income can expect to see a rapid increase in homelessness.
The median rent in the U.S. has risen 11 percent over the past five years, meaning an American making a median annual income would have to spend 28.2 percent of their earnings on a typical rental. This is increasingly close to the 32 percent level that Zillow found can trigger a rapid rise in homelessness.
For 2017, the U.S. Department of Housing and Urban Development estimates that 546,566 people experienced homelessness. But Zillow’s research also found that the number of homeless has been undercounted nationwide, missing roughly 115,000 people, or 20 percent.
It has long been a real estate rule of thumb that a person’s housing costs should not exceed roughly 30 percent of their income, and this research finds empirical evidence to support that adage at the community level. When the share of average income spent on rent in a community begins to meaningfully exceed that line, the risk of housing insecurity and/or homelessness rapidly increases. Establishing this link to community-level rent affordability in the first place provides an important nuance to conventional wisdom about the root causes of homelessness. The 32 percent threshold provides a crucial benchmark for policymakers to gauge exactly where their communities stand – and to adjust programs and resource allocations if they are approaching the threshold.
