Adequate, affordable housing is central to economic well-being. Government policies
promote these objectives by encouraging homeownership and subsidizing the rents of
low-income families. Keeping housing costs in check increases families’ purchasing
power for other needs and for avoiding such material hardships as too little food,
dilapidated housing, unmet health or dental needs, and an inability to pay utility bills.
Rent subsidies directly lower housing costs: average monthly rents of rent-subsidized households were
only $283 in 2009, compared with $823 among unsubsidized renters. For homeowners, average
monthly costs vary from $842 among those with home values exceeding their mortgage loans (including
those with no mortgages) to $1,291 among those with mortgages exceeding their home values.
Homeowners with low mortgage payments might be expected to weather the storm and limit
material hardship by drawing on home equity loans to overcome liquidity constraints. However, where
mortgages exceed home values, no such loans are available: these underwater homeowners may have
to allocate such a high share of their income to housing that they have too little for other needs.
This brief presents estimates of the association between homeownership, rent subsidies, and three
indicators of material hardship: (1) inability to pay utility bills, (2) food insufficiency, and (3) any
indicator (utility bills, food insufficiency, dilapidated housing, or unmet health or dental needs). Nearly
23 percent of households experienced one or more of these hardships in 2010–11. The data in this brief
come from the 2008 panel of the US Census Bureau’s Survey of Income and Program Participation,
which provides information on the same people and households from 2008 through 2011. The focus is
on housing status as of 2009 (September–December) and hardship experienced between 2010 and
Homeowners are wealthier than renters on average and, not surprisingly, are less likely to
experience material hardship. But does the homeownership advantage persist after controlling for
income, income stability, liquid assets, age, race, educational attainment, and family structure? Do rent
subsidies also shield families from material hardships? The graphs provide the answers: they reveal the
reductions in hardship rates associated with homeownership and rent subsidies, relative to hardship
levels experienced by unsubsidized renters.
Both homeownership and subsidized rent are associated with lower material hardship. The
reductions are generally higher for homeowners than for subsidized renters. Moreover, even
homeowners who bought after 2004 (0–4 years ago), just before the crash in home prices, experienced
less hardship than unsubsidized renters. At the same time, long-term homeowners who bought homes
before 2000 (10+ years ago) were most likely to avert material hardship.
Other findings (not in the graphs) are that white, black, and Hispanic homeowners all suffer less
material hardship than their renting counterparts (whether unsubsidized or subsidized). The
homeownership reduction in hardship is most pronounced among Hispanic families. Also, the estimates
show that homeownership’s association with reduced hardship is large, even compared with that of
income, education, and family structure.
About the Authors
Robert I. Lerman is an Institute fellow in the Center on Labor, Human Services, and
Population at the Urban Institute as well as professor of economics at American
University and a research fellow at IZA in Bonn, Germany. A leading expert on
apprenticeship, he recently established the American Institute for Innovative
Apprenticeship. His current research focus is on skills, employer training,
apprenticeship programs in the United States and abroad, and housing policies.
Sisi Zhang is an Associate Professor at the School of Economics, Shanghai University of
Finance and Economics, Shanghai, China.
This brief draws from the January 2014 Urban Institute report Do Homeownership and Rent Subsidies
Protect Individuals from Material Hardship? by Robert Lerman and Sisi Zhang. It was made possible
through support from the Annie E. Casey Foundation and the Ford Foundation, and it is based on work
funded by the Ford Foundation.