Inflation and The Rise in Poverty and Homelessness

“Inflation has reached 40-year highs just as many vulnerable families are readjusting to life without a boost from government stimulus or protections to keep them from being evicted.”

The Washington Post, July 3, 2022

I’ve written twice previously about inflation and its impact on the poor for Crime and Punishment: How Will Americans Keep a Roof Over Their Heads; and a Crash Course on Inflation. And I’ve probably mentioned it a few more times in other posts because inflation has an outsized impact on those living near the poverty level or pay-check-to paycheck. Not surprisingly, the latest statistics show that inflation also is having an even greater impact on fixed income seniors. According to a recent CNN Business report, seniors are depleting their retirement accounts, returning to part time work and even skipping meals to stretch their social security check each month in an attempt to cover the rising costs of goods and services.

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For those of all ages who don’t own their home outright, rising housing costs, which “…accounted for 40% of the price hikes in the latest [May 2022] core inflation numbers.”¹ have made loosing that roof over their heads a constant threat. As reported in The Washington Post, “Every $100 increase in median rent is associated with a 9 percent increase in the estimated homelessness rate, according to a 2020 report by the U.S. Government Accountability Office.” And that’s before rent prices soared nearly 18% on average in the last two years. The small pandemic and post-pandemic wage increases are not keeping up with inflation, and in fact, our current inflation rate has erased most wage earner gains, and then some.

PBS segment describing the impact of soaring rental prices in nearly every state.

It’s interesting that rising rental rates did not start post-pandemic and did not start in an economy bursting with inflation. Monthly rents were reportedly rising in the spring of 2015, according to an article by the National Low Income Housing Coalition (NLIH) titled: “Rental Inflation Drives Homelessness and Housing Instability For the Poor”. At the time of this article’s publication on May 1, 2015, inflation was extremely low—the “price index for personal consumption expenditures” rose just 0.3% from the previous year, yet in that same timeframe, rents averaged a 3.5% rise.

Despite downward pressures on prices in the rest of the economy, the cost of rental housing continues to rise. Rental price increases are a direct result of the mismatch between supply and demand. NLIHC, 2015

This article takes us back to the Great Recession to explain how demand crashed and then rose again as the housing market and overall economy climbed out of the recession. We know that millions of Americans were forced out of their homes during the housing market crash through foreclosure, and most hit the rental market if they were able. And builders were just not able to keep up with the extra demand.

As usual, the poor were hit the hardest: “Nationally [in 2015] there are 10.3 million extremely low income renter households, but only 3.2 million rental homes that are available and affordable to them.”

Now, in an economy with low unemployment and raging inflation, there is once again a shortage of housing, particularly affordable housing necessary for these same groups of people— low wage earner families, seniors, the disabled and veterans. And demand for rental housing will only continue to increase as the Federal Reserve raises interest rates to curb inflation, pricing out first-time homebuyers.

Meanwhile, back in the nation’s capital…

The measures the Biden administration has proposed to build the affordable housing our lower income citizens so desperately need to keep them off the streets, awaits in the Build Back Better Plan, now buried in the bowels of the Senate. The Plan allocates $150 billion to “create and refurbish millions of affordable homes”, but it continues to languish.

President Biden recently proposed a five year plan to close the housing gap through a combination of administrative and legislative actions. Once again, though, it primarily pushes incentives to businesses to develop low income housing, rather than supplying funds directly to low income people. The plan does contain other provisions, vaguely stated, that intend to curb corporate ownership of apartment and single family home rentals. It is not clear whether any progress has been made on this plan since it was issued in mid-May of this year.

I’d love to hear your thoughts on these issues in the Comment Section below. Is our government doing enough to help those teetering on the brink of homelessness through no fault of their own. Do landlords, including the mega investment firms that are gobbling up single family homes and renting them at exorbitant prices, have an obligation to cut back on their rent hikes just a tad, so seniors aren’t thrown out into the street?

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