how much landlords can increase rent in any given year; yet, as of 2019, only five states25 had cities with some form of rent control. Rent control legislation varies with respect to evictions. For example, under California’s rental laws, owners can evict tenants without cause by providing a written notice. Once a unit is vacated, owners can increase the rent without restriction. Overall, rent control has proven to be of limited use because it applies only to older buildings and often provides a disincentive for owners to maintain the property.
According to the National League of Cities, about 800 cities have mandated “inclusionary housing” or “opportunity housing.”26 While the details vary by city, the general idea is that developers are required to set aside some percentage of new housing for rent at below the open market rent. Cities provide developers with tax credits for these set asides, which are generally 15% of the development.27 (Just as tax credits vary, so do the required set asides. In some areas developers might be required to set aside as little 5% or as much as 25% of the rental property.)28 Often inclusionary housing is more expensive than FMR. Price points are based on 40–60% of the area median income and rentals are allocated on a lottery system. For communities, inclusionary housing helps to break down economic segregation and can make good neighborhoods more accessible. However, cities’ efforts to find a way to balance local income and local housing costs leave many frustrated. Some developers argue that despite the tax breaks, inclusionary housing laws make it hard for them to recoup their investments. Renters face a lottery system in which hundreds (sometimes thousands) of people apply for a single unit. For many struggling families, in any case, the so-called affordable housing is completely unaffordable.
While government efforts to subsidize rentals (Section 8 housing vouchers, low-income housing tax credit, and public housing) are expensive, the federal government actually spends more on subsidies for homeowners than it does for renters.29 Housing subsidies for homeowners come in the form of deductions for mortgage interest, real estate tax, and tax exclusions on capital gains from sales and accelerated depreciation (for owners of rental apartments). In 2015, these deductions for homeowners were more than double the combined costs of all federal subsidized rentals. Long story short, families are left to shoulder the burden of rising rents.30 The US has yet to address the housing crisis that drives families into poverty and too often into homelessness. Throughout my year of travel, I did not meet anyone who paid FMR – everyone paid more for rent and everyone felt the burden of rent in different ways. For some it meant having to live in shared housing, for others it meant being hard pressed to manage monthly bills, and for still others it meant not being able to afford to retire. Yet HUD’s calculation of FMR is the only standard measure of market rents available and, as we will see in the next section, it is used for other budget calculations.
Framework 3: Poverty – The Federal Poverty Line vs Self-sufficiency Budget
As a nation, we use the federal poverty line to set a threshold, an economic floor, for living standards.31 The federal government uses this threshold in two ways: first to determine whether or not a person or family qualifies for assistance, and then again to calculate the number of people who live in poverty. In 2018, the federal threshold for poverty was a pre-tax income of $12,140 for an individual. For a family of two, the poverty line creeps up to $16,460; for a family of three it moves to $20,780; and for a family of four to $25,100. By this standard, nationwide about 40 million people live in poverty; of those, 18.5 million live in extreme poverty and 5.3 million live in conditions of absolute poverty that we associate with the developing world.32 This is shocking to think about. And the reality of lived poverty is even worse. Anyone living and working in the United States knows the federal poverty line sets an unrealistic definition of poverty. Clearly the government has to know this, too.
The federal poverty line was developed for the government by Mollie Orshansky in the 1960s, when a family’s food budget was thought to be one-third of their expenses. “Orshansky based her poverty thresholds on the economy food plan – the cheapest of four food plans developed by the Department of Agriculture.”33 She calculated the cost of groceries to meet those food plans and multiplied each of those costs by three to create the poverty line. Today the poverty line continues to be calculated the same way: as three times the cost of groceries for the cheapest food plan. There are at least three basic problems with this calculation. First, groceries have been a much smaller part of a family budget for decades. For many families, the costs of childcare, rent, and health care have outpaced groceries. In addition, expenses for transportation, phone, and internet are both substantial and indispensable. Second, as we just saw, most families spend considerably more than 30% of their income on housing. Third, national averages will always distort budget percentages. As incomes rise, wealthier households spend more money on food, but even so, the percentage of money spent on food is a smaller part of the household budget. Poor families spend less on food, but food costs are a larger part of their overall income.
The cost of food was never a good way to measure poverty; this calculation has clear problems with real consequences. Accurate measures of poverty are key to understanding the health of the economy.34 Yet the federal poverty line provides an unrealistically low definition of poverty that undercounts the number of people who are struggling to make ends meet and limits the ability of people to qualify for assistance. Millions of families disappear into the chasm created by this standard: they are not able to pay basic bills every month and yet they are not counted as poor. This reality is complicated by the fact that in the US people do not commonly refer to themselves as poor, even when they are unable to reliably meet basic needs.
To get a better sense of people’s experiences, let’s look at how much money it takes to simply pay the basic bills every month – what is known as economic self-sufficiency, or just self-sufficiency. The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think-tank created in 1986 to help ensure that the needs of low- and middle-income workers are included in economic policy discussions. In addition to conducting cutting-edge research, EPI provides an online Family Budget Calculator that calculates economic self-sufficiency for regions across the country. These calculations appear throughout this book, in each case generated on the EPI website. The calculator primarily relies on government data to determine the costs of housing, food, childcare, transportation, health care, and other necessities, as well as taxes for specific locations across the country. For example, the budget for food comes from Official USDA Food Plans: Cost of Food at Home at Four Levels, a report published by the Department of Agriculture’s Center for Nutrition Policy and Promotion.35 The housing costs are based on the Fair Market Rent calculations used by HUD for their housing voucher program. FMRs provide a standardized way to estimate housing expenses in specific areas of the country – which is of value, even if the estimates tend to run a bit low. Importantly, EPI provides a transparent estimate of what it costs to be economically self-sufficient – not a calculation of poverty levels.
From the EPI self-sufficiency calculations it’s clear that taxes as well as rent vary widely from place to place. The EPI calculator accounts for regional differences beyond rent. For example, in San Francisco, California, a basic level of economic self-sufficiency for two adults with two children requires an annual income of $148,440. Just across the bay in Oakland, this same family would need to earn $123,310 to be self-sufficient. In Athens County, Ohio, the same family would need $72,284 to cover their basic needs. Keep in mind that the federal poverty line for this same family of four is $25,100 – regardless of where the family lives. In none of these communities is an annual pre-tax income of $25,100 for a family of four the start of poverty.
If these numbers seem high to you, consider that many families can and do get by on a lot less. They squeak by without health care or dental care, have a friend or family member watch the kids, skimp on groceries, “repurpose”
