2017 Symposium Industry Report: Pay for Success

income ratio fails to account for “absolute” price floors, or the minimum costs of housing units that are independent of a household’s income. Housing prices are not priced “relatively” to families’ incomes as a certain percentage, and defining affordability as a ratio is flawed logic. Finally, what a household “can” pay is not necessarily what a household can realistically afford; defining affordable hous- ing as “housing a family can afford” does not make logical sense. Housing and Transportation Costs To account for the related costs of housing, some advocate for a “housing and” approach that more comprehensively evaluates the cost of housing, namely the transportation costs incurred during commute to work, school, etc. 7 The Center for Neighborhood Technology allots 18% of income to transportation costs as reasonable. Though factoring in transportation costs gives a more realistic understanding of what is “affordable” and helps fight misleading statistics on low-cost housing that is far from an urban center, it still fails to account for other hidden costs and still relies on an arbitrary assumption that a certain percentage of monthly income can afford absolute expenses. Shelter Poverty/Residual Income Michael Stone’s “shelter poverty” concept was proposed in the 1980s as a new barometer of housing insecurity that used a sliding scale of affordability that accounts for household composition (since larger households incur more costs) and affordability burdens that are not proportional to income. 8 Though this approach does not dramatically alter the number of individuals identified as housing insecure, it provides an innovative approach to understanding housing affordability that is sensitive to the real-world implications of economies and family life. Further Criticisms of Economic Definitions of Housing Insecurity Critics of a purely economic definition of affordable housing note that other neg- ative experiences of housing, such as overcrowding or substandard conditions, also stem from issues of affordability, and thus should be factored into official calculations. They also note that “affordability” is not an absolute character- istic of housing, but rather one that is relative to each individual based on 1) what standard of “affordability” 2) individual characteristics of the renter, and 3) length of occupancy. Standards of affordability are also normative, yet regarded as empirical; what a household spends on housing may not be what they ought or want to spend. 9 Understanding the Numbers No matter how the affordability pie is cut, there is no disputing that the slice of Americans who are housing-insecure is disproportionately large.

12 Pay for Success & Affordable Housing | Stefano Rumi

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