An Updated Measure of Poverty (Re)Drawing the Line (2023) / Chapter Skim
Currently Skimming:
5 Challenging Categories: Housing/Shelter
5 Challenging Categories: Housing/Shelter
Pages 67-80
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From page 67... ...
As depicted in Figure 5-2, housing costs subsume an even higher share of monthly income for households with low incomes. Given its magnitude, the methodological choice for handling housing in a poverty measure -- both in terms of establishing basic need and including housing in the estimate of resources -- can have a major impact on who is counted as poor, on geographic variation in poverty rates, and on the overall poverty rate.
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From page 68... ...
While the basic need for shelter is the same for all households of the same size and composition, the resource calculation should ideally reflect the fact that homeowners have an asset (a home) that delivers a flow of rental FIGURE 5-2 Housing costs, as a percentage of income, for households with income less than 200 percent of the official poverty level.
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From page 69... ...
Any imputation of implicit rental income should also take into account and deduct the user costs incurred by home ownership (e.g., property taxes, maintenance and repairs, and mortgage interest)
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From page 70... ...
For CUs living in metropolitan areas, the SPM's measure of need is geographically adjusted based on local housing costs. For those living in nonmetropolitan areas, the geographic adjustment is based on housing costs for all nonmetropolitan counties within the state (Renwick and Garner, 2020)
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From page 71... ...
The rents of recent movers are typically higher than those paid by established renters, and this difference is generally larger in more rapidly appreciating areas. However, an argument can be made that the rents paid by recent movers are a better measure of the available market rents in a local area, and thus more accurately capture housing costs for those actively seeking housing.
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From page 72... ...
Recommendation 5.3: The Principal Poverty Measure should discontinue the practice of maintaining separate thresholds for homeowners with a mortgage, homeowners without a mortgage, and renters. While owners without mortgages face lower monthly housing costs, these differences can be accounted for on the resource side.
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From page 73... ...
Although HUD allows local agencies to set allowable unit sizes, HUD's documentation describes parameters for households with various numbers of members (e.g., households with three people should not live in homes with fewer than two bedrooms or more than three)
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From page 74... ...
to adjust for differences in shelter and utility costs for consumer units of varying sizes, and then create a new equivalence scale specific to food and clothing. The Census Bureau should research whether using separate equivalence scales for housing still makes little difference for a version of the Principal Poverty Measure using the geographically specific adjustments to consumer unit sizes embedded in the FMRs.
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From page 75... ...
Recommendation 5.5: Principal Poverty Measure thresholds should continue to reflect geographic dif ferences in housing costs. Geographic adjustments should apply to owners and renters based on official Fair Market Rents, which are set at the individual metropolitan area or nonmetropolitan county level.
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From page 76... ...
Key arguments against incorporating implicit rental income into a poverty measure are: (1) it is difficult for people to understand the concept; and (2)
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From page 77... ...
(As noted below, if rental equivalence varies by number of bedrooms, out-of-pocket housing cost estimates should also then vary by number of bedrooms.) RECOMMENDATION 5.6: For estimating Principal Poverty Measure unit resources, implicit rental income should be included for households that own homes.
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From page 78... ...
Also, if the Census Bureau accounts for within-market differences in the size and quality of homes in its estimates of rental equivalence, then it should similarly allow user costs to vary with home size and value. User costs should be capped at the value of the rental equivalence, so net implicit rental income cannot be negative.
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From page 79... ...
RECOMMENDATION 5.9: In assigning the value of in-kind housing assistance to Principal Poverty Measure unit resources, the calculation should be simplified by estimating the expected subsidy as Fair Market Rent value minus the greater of 30 percent of adjusted income or 10 percent of gross income. This approach essentially mirrors that currently used by the Census Bureau, described by Renwick and Mitchel (2015)
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