Over 130,000 people are experiencing homelessness on any given night in the state of California. Over the last decade, average rents across the state have steadily increased, inflation-adjusted wages have mostly remained stagnant, and the supply of affordable housing has decreased dramatically (Cowan & Gebelof, 2019). Across California, 53% of renters are considered “rent burdened,” meaning they spend more than 30% of their household income on rent and utilities each month (American Community Survey (ACS), 2017). The graph below shows the rise in rent burdened families over time for the United States as a whole. Research suggests that homelessness increases faster in communities with high rates of rent burden compared to those where residents can afford their rent (Glynn & Casey, 2018), suggesting that mitigating rent burden could be one strategy to reduce inflows to homelessness.
This analysis proposes a “Rent Burden Subsidy” policy that would cover household rental expenditures that exceed some threshold in rent burden to reduce financial strain on the state’s renters. The analysis projects the cost of multiple versions of this policy, based on two levels of rent burden and various rent and income eligibility rules. The paper concludes by placing the cost of this proposal within the broader context of United States housing policy and addressing potential concerns and limitations with the policy. The analysis finds a wide range of potential annual costs, ranging from $7.09 billion to $21.95 billion. However, most versions of the policy cost less per household on average than other major housing subsidy programs. Moreover, the rent and income eligibility caps prevent exploitation from those with excessively high rents, ensure that the subsidy targets California’s most vulnerable households, and mitigate moral hazard concerns.