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IMPACT ON ALICE

What do families do if they can’t afford adequate housing?

Despite wide national variation, housing costs for renters and owners consistently outpace wages. Faced with high housing costs, most ALICE households are considered housing burdened, meaning that housing costs more than 30 percent of their income. In 2017, households with lower incomes (less than $50,000 per year) were more likely to be housing burdened than those with higher incomes (above $75,000) across all housing types.

Pay More Than Budget Allows

With the cost of housing consuming so much of a family’s budget, ALICE families almost always have to make sacrifices in other areas.

Housing, Food, Health Care, Child Care and Education Icons

Consequences

Less money available for other needs: As housing costs rise, families are often forced to forgo other basic needs, such as food, medicine, or child care.7

Less ability to save: As more money is spent on housing, less is devoted to saving for an emergency or other future needs, creating a vicious cycle of financial instability with higher long-term costs.9

Greater risk of losing housing: Rising housing costs result in more evictions and foreclosures. Nationwide in 2017, 10 percent of renters with income below the Federal Poverty Level (FPL) and 9 percent of those at 200 percent of the FPL could not pay all of their rent; across the two groups, 9 percent thought it was likely they would be evicted.10

While foreclosure rates have been down since 2010, the increased cost of living continues to push families to make this hard choice. In 2017, foreclosure rates ranged from 1 in every 17,560 homes in South Dakota to 1 in every 744 homes in Delaware.11

Live in Less Desirable Locations

The cost — and quality — of housing varies greatly depending on location. For many ALICE families, the only housing they can afford is located in less desirable areas. These areas typically have one or more of the following issues: high crime rates, run-down infrastructure, little to no public transportation, or lower-quality schools. They are also often located far from jobs, full-service grocery stores, public services (such as parks and post offices), and other necessities.

Housing, Health Care, Child Care and Education, Transportation Icons

Consequences

Living in unsafe neighborhoods: Property crime and violent crime are both concentrated in low-income communities, even more so now than they were the 1970s. In 2017, households with income below the FPL were victimized at more than double the rate of high-income households (those above 400 percent of the FPL).12

Increased transportation costs: Many lower-cost housing units are located far from jobs and services. Low-income households that spend 30 percent or less of their income on housing are estimated to spend an average of $100 more per month on transportation than those that allocate over half their income to housing.13

INCOME AND SAFETY

Studies have shown that low-income children who live in more socioeconomically diverse communities with lower levels of poverty are less likely to become the victims of crime.21

Longer commutes: Because 95 percent of workers do not have access to public transportation, they must drive a vehicle to get to work. While the average American’s commute is under 30 minutes, more than 10 million Americans have a commute of at least an hour each way.14 One analysis estimates that across the country’s 50 largest metro areas, travel time alone costs workers $107 billion per year.15 Long commutes also contribute to physical and behavioral health issues, diminished productivity, and absenteeism.16

Lower-quality schools: Most high-performing schools are located in neighborhoods with more expensive housing, higher taxes, and more public amenities.17

Closer to Environmental Hazards: One of the reasons that housing may cost less is because it is located in flood prone areas or near polluting entities such as highways or incinerators.18

Housing and Health: Individuals who view their neighborhoods as unsafe are much more likely to suffer from depression and substance use disorders, which in turn are risk factors for cardiovascular disease and other serious illnesses.19

Children in low-income communities are more likely to suffer anxiety, lower school performance, and chronic health issues.20

Rent or Buy Substandard Housing

Given the high cost of quality housing, ALICE families are often forced to choose homes that are in substandard condition. Such housing presents a variety of health and safety risks including malfunctioning or absent heating, ventilation, and air conditioning systems; sub-par plumbing and leaks; and exposure to vermin or lead, mold, and other toxins.22 In the U.S., 5 percent of the housing stock has severe problems, such as issues with plumbing, heating, or cleanliness.23

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Consequences

Maintenance costs: Poor quality or older housing requires additional costs for upkeep, and a costly repair can threaten the financial stability of an ALICE household.

Physical and behavioral health risks: Living in substandard units affects the health and well-being of residents. The risks include injuries, asthma, infections, and exposure to toxins such as lead.25 For children and adults, living in unsafe housing for an extended period of time also causes prolonged, elevated stress — often called “toxic stress” — which has a negative impact on mental and physical health as well as on educational outcomes.26

LEAD EXPOSURE

Lead impacts children in ALICE families. Nationwide, at least 4 million housing units with exposed lead have children living in them, and an estimated 500,000 children under the age of six have lead levels that are high enough to affect long-term cognitive and behavioral development.24

For ALICE, even routine do-it-yourself repairs pose safety risks and can be expensive. If the repairs are not made, families may face the risks of living in an unsafe environment, and the potential for injury can, in turn, increase the costs for health care services.27 Senior homeowners with income less than 125 percent of the FPL pay an average of 15 percent of their income on maintenance.28

Seek Housing Assistance

Another option is to seek homeowner or rental assistance. While a large number of ALICE households depend on this kind of assistance, it remains unavailable to many others. Approximately 4.8 million households (about 4 percent of all U.S. households) receive homeowner or rental assistance from the U.S. Department of Housing and Urban Development (HUD).29 Yet only one-quarter of households eligible for federal rental housing assistance actually receive it. Federal housing subsidies:

  • Go disproportionately to higher-income households​
  • Are deeply underfunded for rental assistance30
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Consequences

Risk of losing assistance: Because of eligibility cutoffs, ALICE and poverty-level families can lose their housing assistance if they get a better job, work more hours, or receive a raise that pushes their income above the cutoff. Some families make the difficult choice to forgo work or higher-paying jobs for fear of losing housing assistance, which is so hard to obtain in the first place.33

Living in less desirable neighborhoods: Public housing is often located in distressed, under-resourced neighborhoods with higher crime rates, less public transportation, and lower-quality schools than wealthier neighborhoods. Choice is limited by several factors, including tight market conditions, racial and ethnic discrimination, the lack of moderately priced rental housing, and landlords who are unwilling to accept voucher payments.34

WAITING FOR SUBSIDIES

Over half of the 4,000 housing authorities across the country that provide subsidized rentals have waiting lists. In 2016, 50 percent of public housing and 11 percent of Housing Choice Voucher waiting lists were closed to the public.31 In the same year, the median Housing Choice Voucher waiting list had a wait time of 1.5 years, with 25 percent of them having a wait time of three years or more.32

Borrow At Higher Rates

ALICE families may decide to take out a high-interest loan to purchase a home. This option could be less expensive than renting in some locations, and offers a way to build equity. However, many potential ALICE homeowners do not qualify for competitive financing rates or do not have savings for a down payment. So that for ALICE households to buy, they are often forced to borrow at high rates or use risky financial products, with potential long-term consequences.35 Nationally, the two most common reasons renters cite for renting rather than owning a home are that they don’t think they can afford the down payment (50 percent of respondents) or they don’t believe that they will qualify for a mortgage (31 percent).36

Housing, Child Care and Education, Health Care Icons

Consequences

High-risk loans: ALICE households who do not qualify for traditional mortgages often look for alternatives, leading to an increased use of “contract for deeds” or “rent-to-own” mortgages that charge higher interest rates and have less favorable terms for borrowers.37 In each of these financing scenarios, the combination of a lower income and significantly worse financial terms puts borrowers at a far higher risk of foreclosure.38

Greater hardship over time and stagnant assets: High-risk loans may assist ALICE households in the short term, but in the longer term these loans incur both higher costs and lower returns on investment. In addition, the mortgage tax deduction, which has traditionally been one of the main tax benefits of homeownership, is negligible for low-income households.39

Foreclosure: ALICE families who own their homes are more susceptible to foreclosure than higher income families. They are more likely to have sub-prime mortgages, which are granted to individuals with poor credit ratings. These households now make up the majority of foreclosures.40 Households of color are also more likely to face foreclosure. From 2007 to 2013, 29 percent of Black homeowners and 32 percent of Hispanic homeowners were foreclosed on, compared to 11 percent of White homeowners.41

Longer-term financial instability: When ALICE families have a home foreclosed on, they not only lose a stable place to live and their primary asset, but their credit rating drops. This creates barriers to future home purchases and even rentals, especially for low-income families. A low credit rating, combined with a lack of funds for a down payment or security deposit, means that ALICE households recovering from foreclosure often have difficulty finding new housing.42

HOMELESS RATE IN THE U.S.

In 2017, there were 553,742 homeless people on a single night, a rate of approximately 17 homeless people for every 10,000 people in the general population.44

Homelessness: Ultimately, if an ALICE household can no longer afford their home, or it becomes too unsafe to live in, they can become homeless. Homelessness has a ripple effect across many aspects of life and may lead to issues including:43

  • Gaps in schooling for children; lower academic performance
  • Difficulties with transportation to work and school
  • Short- and long-term physical health issues due to unsafe living conditions
  • Increased emotional and behavioral problems, especially in children and youth
LGBTQ+ YOUTH AND HOMELESSNESS

Lesbian, Gay, Bisexual, Transgender, Queer (LGBTQ+) youth are disproportionately represented in homeless populations, largely due to rejection by family members, stigma, and discrimination. At least 40 percent of homeless youth identify as LGBTQ+, despite making up only 7 percent of the general population. These youth are also more likely to be victims of violence.45

Sources

7
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Fischer, W., & Sard, B. (2016). Chart book: Federal housing spending is poorly matched to need. Center on Budget and Policy Priorities. Retrieved from https://www.cbpp.org/research/housing/chart-book-federal-housing-spending-is-poorly-matched-to-need

8
Joint Center for Housing Studies of Harvard University. (2018). The state of the nation’s housing 2018. Retrieved from https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_State_of_the_Nations_Housing_2018.pdf

9
Joint Center for Housing Studies of Harvard University. (2018). The state of the nation’s housing 2018. Retrieved from https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_State_of_the_Nations_Housing_2018.pdf

10
American Housing Survey. (2017). Delinquent payments and notices — All occupied units. Retrieved from https://www.census.gov/programs-surveys/ahs.html

11
ATTOM Data Solutions. (2018). U.S. foreclosure activity drops to 12-year low in 2017. Retrieved from https://www.attomdata.com/news/foreclosure-trends/2017-year-end-u-s-foreclosure-market-report/

12
Morgan, R. E., & Truman, J. L. (2018, December). Criminal victimization, 2017. Department of Justice, Office of Justice Programs, Bureau of Justice Statistics. Retrieved from https://www.bjs.gov/content/pub/pdf/cv17.pdf

13
Joint Center for Housing Studies at Harvard University. (2016). The state of the nation’s housing 2016. Retrieved from http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/jchs_2016_state_of_the_nations_housing_lowres.pdf

14
American Community Survey. (2017). Means of transportation to work by select characteristics. Retrieved from https://factfinder.census.gov/bkmk/table/1.0/en/ACS/17_5YR/S0802

15
Bliss, L. (2016, June 8). How much does sprawl cost American commuters? CityLab, The Atlantic. Retrieved from http://www.citylab.com/design/2016/06/cost-of-sprawl-us-commuters/486170/

16
Crabtree, S. (2010, August 13). Well-being lower among workers with long commutes. Gallup-Healthways Well-Being Index. Retrieved from http://www.gallup.com/poll/142142/wellbeing-lower-amongworkers-long-commutes.aspx

van Ommeren, J., & Gutierrez-i-Puigarnau, E. (2011, January 11). Are workers with a long commute less productive? An empirical analysis of absenteeism. Regional Science and Urban Economics, 41(1), 1–8. Retrieved from http://www.sciencedirect.com/science/article/pii/S0166046210000633

17
National Low Income Housing Coalition. (2018). Out of Reach 2018: How much do you need to earn to afford a modest apartment in your state? Retrieved from https://reports.nlihc.org/oor

18
Tishman Environment and Design Center. (2019, May). U.S. municipal solid waste incinerators: An industry in decline. The New School. Retrieved from https://tishmancenter.org/wp-content/uploads/2019/05/CR_GaiaReportFinal_05.21.pdf

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Ross, T. (2013, August). A disaster in the making addressing the vulnerability of low-income communities to extreme weather. Center for American Progress. Retrieved from https://www.americanprogress.org/wp-content/uploads/2013/08/LowIncomeResilience-3.pdf

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20
Coley, R., Leventhal, T., Lynch, A., & Kull, M. (2013, September). Relations between housing characteristics and the well-being of low- income children and adolescents. Developmental Psychology, 49(9), 1775–1786. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3766502/

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21
Hanson, R., Sawyer, G., Begle, A., & Hubel, G. (2010). The impact of crime victimization on quality of life. Journal of Trauma and Stress, 23(2), 189–197. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2910433/

Galster, G. (2014, March). How neighborhoods affect health, well-being, and young people’s futures. MacArthur Foundation, How Housing Matters. Policy Research Brief. Retrieved from https://www.macfound.org/media/files/HHM_-_Neighborhoods_Affect_Health_Well-being_Young_Peoples_Futures.pdf

Graif, C., & Matthews, S. A. (2017). The long arm of poverty: Extended and relational geographies of child victimization and neighborhood violence exposures. Justice Quarterly, 64(6), 1096–1125. Retrieved from https://www.tandfonline.com/doi/abs/10.1080/07418825.2016.1276951?scroll=top&needAccess=true&journalCode=rjqy20

22
Taylor, L. (2018, June 7). Housing and health: An overview of the literature. Health Affairs Health Policy Brief. Retrieved from https://www.healthaffairs.org/do/10.1377/hpb20180313.396577/full/

23
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24
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25
Taylor, L. (2018, June 7). Housing and health: An overview of the literature. Health Affairs Health Policy Brief. Retrieved from https://www.healthaffairs.org/do/10.1377/hpb20180313.396577/full/

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27
Taylor, L. (2018, June 7). Housing and health: An overview of the literature. Health Affairs Health Policy Brief. Retrieved from https://www.healthaffairs.org/do/10.1377/hpb20180313.396577/full/

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28
Johnson, R. W. (2015, July 15). Housing costs and financial challenges for low-income older adults. Urban Institute. Retrieved from https://www.urban.org/sites/default/files/2000312-housing-costs-and-financial-challenges-for-low-income-older-adults.pdf

29
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30
Fischer, W., & Sard, B. (2016). Chart book: Federal housing spending is poorly matched to need. Center on Budget and Policy Priorities. Retrieved from https://www.cbpp.org/research/housing/chart-book-federal-housing-spending-is-poorly-matched-to-need

31
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32
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33
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34
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36
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37
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38
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39
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40
Riquier, A. (July 27, 2016, July 27). This one chart shows how dramatically foreclosures have fallen. MarketWatch. Retrieved from https://www.marketwatch.com/story/where-have-all-the-foreclosures-gone-2016-07-26

41
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42
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43
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44
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45
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Druso, L. E., & Gates, G. J. (2012). Serving our youth: Findings from a national survey of service providers working with lesbian, gay, bisexual, and transgender youth who are homeless or at risk of becoming homeless. Los Angeles: The Williams Institute with True Colors Fund and The Palette Fund. Retrieved from http://williamsinstitute.law.ucla.edu/wp-content/uploads/Durso-Gates-LGBT-Homeless-Youth-Survey-July-2012.pdf