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The Consequences of Insufficient Household Income

This new Consequences of Insufficient Household Income report provides a deeper level of understanding of the choices that ALICE and poverty-level families across the country make when they do not have enough income or assistance to afford basic necessities, and the consequences of those choices.

Figure 4 shows the 2014

Figure 4 shows the 2014 gap for renters in the states that the United Way ALICE Project had studied at that point. Analysis of the housing stock by county reveals that across all of these states, the available units do not match current needs. The state of Michigan, for example, would need almost 350,000 additional affordable rental units – and probably more, given the number of households that are housing burdened – in order to meet the existing demand. Figure 4. Gap Between Renters Below ALICE Threshold and Number of Affordable Units, 2014 2,500,000 Renters and Rental Units 2,000,000 1,500,000 1,000,000 500,000 Gap in Units 0 NY FL MI NJ WI WA IN MD OR LA CT IA ID 471,893 783,474 348,147 156,057 218,850 209,823 167,670 60,043 195,341 159,891 47,861 81,241 47,515 Renters Below AT Affordable Units Note: Calculated for all states with 2014 ALICE Reports; Ohio and Virginia not included. Source: American Community Survey, 2014; the ALICE Threshold, 2014; and U.S. Department of Housing and Urban Development (HUD), 2014a Housing is not only a question of shelter; ALICE families know all too well that where one lives matters. Location impacts current and future health, exposure to violence, housing and transportation costs, educational opportunities, and future economic prosperity. One landmark study found that families who were randomly selected to move from a high-poverty neighborhood to a low-poverty area had a range of improved outcomes for years to come. Children in these families were more likely to attend college and less likely to become single parents, and had earnings that were 31 percent higher than those who remained in highpoverty neighborhoods (Chetty, Hendren, & Katz, 2015; Chetty & Hendren, 2015). Strategy 1: Pay More for Housing Than the Family Budget Allows When faced with the cost of housing beyond their budget, most ALICE households pay more than they can afford. These families are “housing burdened,” defined as renters paying more than 30 percent of their income on rent or owners paying more than 30 percent of their income on monthly homeowner costs, which include their mortgage. Households with lower incomes are more likely to be housing burdened than those with higher incomes. Nationally, 47 percent of renters spend more than 30 percent of their income on gross rent, and 24 percent spend at least half of their income on rent (Fischer & Sard, 2016; Johnson, 2015; American Community Survey, 2014). Despite wide variation across the country, housing costs consistently outpace wages. 10 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME

In 2014, the U.S. states with the highest rates of “severely rent burdened” households (at least 50 percent of income going to rent) were California, Florida, and New York, each with 28 percent of households. Wyoming had the lowest rate at 16 percent. Low-income renters such as ALICE families are even more likely to be housing burdened, with rates ranging from 57 percent in South Dakota and Maine to 68 percent in Ohio, to 79 percent in Florida, and to 83 percent in Nevada (Aurand, et al., 2016; American Community Survey, 2014). Consequences Less money available for other current needs: Housing burdened families are often forced to skimp on other basic needs such as food, medicine, child care, or heat. These deprivations, as well as the stress they cause, can increase the need for health care, which becomes yet another expense. Less money devoted to saving for an emergency or making investments for the future, such as higher education or retirement: That lack of savings creates a vicious cycle of financial instability for ALICE families, and increases the risk of higher costs for health care and social services over the longer term (National Low Income Housing Coalition, 2016; Belsky, Goodman, & Drew, 2005). More evictions and foreclosures: With an increasing number of households spending more than 50 percent of their income on housing, many low-income families become unable to pay their rent or mortgage, leading to evictions and foreclosures. In 2013, across the country, one in eight renters with income below the FPL could not pay all of their rent and thought it was likely they would be evicted. Eviction is costly for landlords, too, averaging $1,698 per eviction in 2014 (including maintenance UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 11

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