Economic Progress

This is the critical number that shows when housing breaks down

Homeless man Kel sleeps in the spot where he lives in the subway next to Hyde Park Station in London, Britain, December 19, 2017. REUTERS/Mary Turner  SEARCH "TURNER HOMELESS" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES.     TPX IMAGES OF THE DAY - RC14F3C0C600

Seeking shelter: A homeless man in a London underground station Image: REUTERS/Mary Turner

Emma Charlton
Senior Writer, Forum Agenda
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Economic Progress

How much of your income do you spend on your rent?

The answer probably depends on where you live. Rents can vary wildly from country to country, city to city and even within regions.

While it probably won’t be news that people living in cities generally spend a higher proportion of their income on rent, new research directly links rent affordability to homelessness and highlights the lack of consistent data on the topic.

 When rent affordability exceeds the 32% tipping point, homelessness rises rapidly.
When rent affordability exceeds the 32% tipping point, homelessness rises rapidly. Image: Zillow Economic Research

The critical threshold is 32%, with the report showing that American communities where people spend more than that percentage of their income on their rent can expect a more rapid increase in homelessness. The academics, working with online real-estate company Zillow, also estimate that the scale of homelessness in the US has been undercounted by around 20%.

While the work underscores the idea that there's no one-size-fits-all approach when it comes to tackling homelessness, it does offer policymakers a way to quantify and anticipate when dynamics may be shifting. Since the median US rental takes 28% of earnings, monitoring how the levels are evolving could help to flag up looming problems.

 Seattle and San Francisco are both facing an affordable housing crisis.
Seattle and San Francisco are both facing an affordable housing crisis. Image: Zillow Economic Research

“It’s not appropriate to say we don’t have a problem until we hit 32%,” said Chris Glynn, a Zillow Research Fellow and an Assistant Professor of Decision Sciences at the University of New Hampshire. “It’s time to start thinking about when you will hit that threshold, and what will happens afterward and taking a proactive approach, thinking about the trajectory of your affordable housing.”

Hard to measure

Around 150 million people, or about 2% of the world’s population, are homeless, according to Yale University, and a further 1.6 billion, more than 20%, may lack adequate housing. Since obtaining accurate numbers is difficult, primarily because of variations in the way homelessness is defined, the numbers could be higher.

The Zillow academics estimated the true level of homelessness in the US was 20% greater than the official count, and said there was wide variation across the country. In Los Angeles and San Francisco rent affordability has been well beyond the “crucial benchmark” of 32% of income for decades.

While this research focused on the US, homelessness is a problem for every country.

Tenants in England paid an average of 27% of their gross salary to their landlord in 2016, according to data from the Office for National Statistics. That data also shows regional variation, with tenants in London spending nearly half of their salary on rent, while in northern England, the number was much lower at 23%.

 The homelessness rate varies by country.
The homelessness rate varies by country. Image: OECD, Our World in Data

A number of factors can push people into homelessness, including “shortages of affordable housing, privatization of civic services, investment speculation in housing, unplanned and rapid urbanization, as well as poverty, unemployment and family breakdown,” says Joseph Chamie, an independent consulting demographer and a former director of the United Nations Population Division. “Also contributing is a lack of services and facilities for those suffering from mental illness, alcoholism or substance abuse and displacement caused by conflicts, natural disasters and government housing policies.”

Have you read?

Drawing international comparisons can be challenging because of the different ways it is measured. Among OECD countries, Australia, the Czech Republic and New Zealand report a relatively high level of homelessness, but this is partly explained by the fact that they have a broad definition.

In Australia people are considered homeless if they have “no other options to acquire safe and secure housing, are without shelter, in temporary accommodation, sharing accommodation with a household or living in uninhabitable housing”.

 Homelessness is a problem in every country.
Homelessness is a problem in every country. Image: Zillow

In contrast, the OECD country with the smallest share of homeless people is Japan – 0.004% of the population in 2015 – where figures only refer to rough sleepers.

For policymakers around the world, solving the challenge might mean rethinking ways we live and work or using technology to improve transit.

With the UN predicting that 68% of the global population will live in cities by 2050, innovation and technology can be harnessed to this end, and that’s one of the areas being explored by the World Economic Forum’s Global Future Council on Cities and Urbanization.

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