Valerie Frey and Angelica Salvi Del Pero, OECD Employment, Labour and Social Affairs Directorate
The mother had lost everything: her minimum wage job, the father of her children, and, finally, her apartment. Homeless, she stood by the street with her two young boys, their yellowed mattresses, second-hand books, and dinnerware piled around them on the sidewalk. The kids had been through this before. Her older son dreamt of becoming a carpenter so that he could build her a home.
This scene could come from a Depression-era Steinbeck novel, but instead it is one of the many tales in Matthew Desmond’s harrowing new ethnography, Evicted: Poverty and Profit in the American City. Desmond narrates a handful of stories drawn from the millions of poor Americans who are evicted from rented apartments or houses each year, despite their Herculean efforts to keep their homes.
Sadly, although OECD countries are among the wealthiest in the world, they fail to ensure that all of their residents have a safe, stable, and affordable place to live. Millions of households throughout the OECD struggle to afford good-quality housing.
Across countries, housing is usually the largest expense a household faces. Recent OECD research finds that nearly 15% of tenants and 10% of mortgaged homeowners are overburdened by their rent or mortgage, on average, across the OECD – that is, they spend over 40% of their disposable income on housing.
An even greater share of households report feeling pinched by housing costs, even if they are not counted as overspending in income and spending statistics: more than one in three respondents in a 2012 European survey reported feeling ‘highly burdened’ by their housing costs.
Poor households suffer the most when paying for housing. Households in the bottom 40% of the income scale face much higher housing costs, relative to income, than their wealthier counterparts, reflecting a lack of affordable options. Even middle-class households are not immune: across the OECD, nearly nine percent of middle-class mortgaged homeowners pay over 40% of disposable income on their mortgage.
Of course, affordability of housing does not guarantee that a home is of decent quality. Many homes are overcrowded and unsanitary. On average, 15% of OECD households lack sufficient living space in their home, and overcrowding is worse in poor households and among renters. Over 14% percent of low-income households live without access to an indoor flushing toilet, and rates are highest in Eastern Europe, Chile, and Mexico.
What can be done to help the millions of households who cannot afford good homes? OECD countries have developed housing support policies as a key part of their social protection systems. Improving access to affordable housing is an important goal in OECD countries: the majority of countries we surveyed identify affordability as one of their five most important housing objectives. Despite using a wide set of housing policy instruments, however, governments have not always been effective in achieving their objective.
Homeowner benefits, social rental housing, and housing allowances are three common social policies to support housing. Owner-occupied housing receives much social support in many countries, but this often fails to reach those who need the most help. Grants and financial assistance are provided to home-buyers, often with a focus on low-income households, and owner-occupants also benefit from tax relief for home purchases. However, poor households typically do not benefit from favourable taxation of residential property. Besides being unequitable, these subsidies can distort incentives to invest in other assets and drive prices up in housing markets.
Countries also provide support via social rental housing. Historically, in many OECD countries, the central government has funded (and local authorities directly provided) social housing. In recent years, however, public funding has decreased and has been directed to other providers, including non-profit and for-profit organizations and landlords. As a result there is an increasing concentration of low-income and vulnerable households among social housing tenants, and social housing providers will have to adapt to new incentives, objectives, and client characteristics.
Means-tested housing allowances are another instrument commonly used to help lower-income groups access housing. These allowances offer some advantages for delivering housing support to poor households (e.g. fair access to benefits and housing mobility), but have drawbacks compared to social rental housing; for example, allowances cannot guarantee good housing quality, and may perversely affect rent prices.
As public spending has shifted away from social housing, the private rental market has played an increasingly important role in offering affordable housing. OECD governments need to ensure that their housing policies do not discourage the supply or affordability of private rentals. We need to develop a better understanding of how housing allowances, rent regulation, tenancy protection, and other tenancy laws facilitate or deter the private sector from offering good-quality affordable housing to poor households. Indeed, many of the saddest tales of eviction in Desmond’s book come from poor families who were barely ineligible (or waitlisted) for social housing, and were instead forced to navigate a predatory private rental market. The American mother profiled by Desmond was lucky to find a two-bedroom apartment in a poor city for $550 per month. But with an income of $628 per month, she had almost no cash left over and no way to cushion unexpected costs.
An affordable and safe home is on the wish list of many families this year. More research and data are needed to develop effective housing support policies, and OECD governments must find ways to implement good policies efficiently and equitably. In the wealthiest countries in the world, no one should go homeless or live in unsafe conditions. With coordinated and well-informed social policies, OECD countries can go a long way towards ensuring that all individuals and families can live in affordable, good-quality homes.
Salvi del Pero, A., W. Adema, V. Ferraro and V. Frey (2016), “Policies to promote access to good-quality affordable housing in OECD countries”, OECD Social, Employment and Migration Working Papers, No. 176, OECD Publishing, Paris.
OECD ((2015) Integrating Social Services for Vulnerable Groups: Bridging Sectors for Better Service Delivery, OECD Publishing, Paris , Chapter 4 – Homelessness, the homeless and integrated social services.