BOX 2-3
The Economics of Rental Housing

Many factors affect the economics, and ultimately the availability, of low-cost, private-market housing. Empirical studies generally confirm that low-income housing may be relatively more expensive because of greater operating costs, depreciation costs, higher rates of tenant turnover, higher rental collection costs, or delinquencies in payment (Muth, 1969). Recent increases in utility costs, property taxes, and insurance premiums have also put even greater upward pressures on rental operating costs (Goodman, 2004).

Other maintenance costs, such as mold eradication, which threatens to become a pervasive economic as well as health problem, can also cause an increase in operating costs (Goodman, 2004). Older housing, especially in low-income neighborhoods, also tends to have higher operating costs relative to newer housing. For example, one research survey estimated that utility costs are 55 percent less for properties built in the 1990s than for properties of the same quality, size, and location built in the 1970s (Goodman, 2004). In general, properties built since 1980 cost at least 10 percent less to operate than properties built before 1970 (Goodman, 2004).


Hazards present in the home environment pose numerous and substantial health risks to children in both urban and rural environments, with children in low-income families at greater risk. Housing that is both affordable and hazard free is an increasingly scarce commodity for low-income families. An increase in affordable housing and broader requirements for abatement of hazards would offer prospects of genuinely healthy housing for all children. This has largely been accomplished in some public housing, particularly for lead. However, the private low-income housing market provides limited incentives for landlords to do so. The economics of low-income housing suggests that even if it were technically feasible to eliminate all housing health hazards to children, doing so might exacerbate existing private-market shortages or push up housing costs. Thus, under current housing policies, there is a need for research to identify interventions that are not only effective at ameliorating housing health hazards but also cost effective.

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