Housing Costs Drive Up Poverty Rates

Housing Costs Drive Up Poverty Rates

California’s high rate of poverty is red meat for right-wing commentators. But, in the interest of a more productive dialogue than “owning the libs,” let’s a deep dive into the statistics of the U.S. Census Bureau.

In addition to the official poverty measure, the Census Bureau also has a supplemental poverty measure (SPM) that includes in its calculations “geographic adjustments for differences in housing costs by tenure,” among other changes. This makes sense–if I were to take a 10% salary cut to move to a place with a 15% lower cost of living, even though I’m making less money my real income has increased. Conversely, taking a 10% salary increase to move to a 15% higher cost of living means my real income has declined.

In Curbed: Los Angeles, Elijah Chiland uses this fact, along with Census data, to add some nuance to California’s poverty rate:

California’s poverty rate is higher than any other U.S. state—though it has improved since last year, when the Census Bureau reported that 20.4 percent of residents were living below the poverty line…

By traditional measurements, 13.3 percent of Californians are impoverished, slightly under the national rate of 13.4 percent. But using the supplemental poverty measure, that share of residents rises to 19 percent…

According to the report, housing costs were likely a key factor in boosting the supplemental poverty measure rate in the 16 states where this number was higher than the traditional poverty measure.

Chiland, and the Census Bureau data he cites, are spot on. Though data are not available on the specific contribution housing costs makes to the SPM, we can observe that a number of jurisdictions with notoriously high housing costs have higher poverty rates when using the SPM.

It’s worth repeating that these measures incorporate a host of other metrics related to poverty and cost of living, but the contribution of housing costs to poverty is likely substantial.

In addition to the obvious harms of increased housing costs raising poverty rates, increased housing costs also reduce the returns from moving to high-productivity areas (like California), thus discouraging such moves and thereby putting downward pressure on overall national economic output.

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By |2018-10-23T07:13:56-07:00October 23rd, 2018|Blog, Land Use Regulation|