Understanding the Affordable Housing Shortage
Takeaway: Conventional wisdom holds that high housing costs force low-income families into expensive rent payments, but a new study reveals that most rent-burdened households actually have many cheaper vacant apartments available in their immediate local area.
Key Points
The average low-income household spending more than 30% or 50% of its income on rent could move to a cheaper vacant apartment in the same local area with the same number of bedrooms.
Even in high-cost, tight housing markets like Boston, Seattle, and Los Angeles, low-income renters have dozens of vacant units available that would cut their rent by 30% or more.
The findings suggest that high rent burdens often reflect a trade-off for better quality housing and neighborhoods, implying that direct rental vouchers are far more cost-effective than building subsidized housing projects.
Why is housing so expensive, and why do so many families struggle to afford it? Across the United States, news reports and policy papers frequently point to an alarming statistic: nearly half of all renters pay more than 30% of their income on housing, with millions spending over 50%.
Standard economic policy reports often cite these numbers as proof of a massive deficit in low-cost homes, concluding that government programs urgently need to construct millions of affordable units.
However, economists Dirk W. Early and Edgar O. Olsen ask a fundamental question: Are low-income families spending a large share of their income on rent because there are simply no lower-cost options available, or are they choosing to pay more to secure better housing?
To answer this, the researchers analyzed data from the U.S. Census Bureau’s American Community Survey.
They focused on low-income renters—specifically the poorest 20% of households in each local market—who paid high shares of their income toward rent. They then systematically compared these households' current rent payments to asking rents for vacant apartments located within the exact same local geographic area (known as Public Use Microdata Areas, or PUMAs) that had at least as many bedrooms.
Findings
The data revealed that lower-cost options are far more plentiful than traditional metrics suggest. Nationwide, the average low-income household facing a heavy rent burden had roughly 230 cheaper vacant apartments of appropriate size within their local area. Because moving carries financial and physical costs, the authors checked for deeper discounts.
They found that the average rent-burdened low-income household had nearly 80 to 90 vacant local units available that would reduce their housing costs by at least 30%.
Unsurprisingly, local housing market dynamics mattered.
In looser markets like Memphis or Little Rock, renters had hundreds of cheaper options. Yet even in squeezed, low-vacancy markets like Los Angeles, San Jose, and Boston, rent-burdened families still had an average of 30 to 60 vacant apartments nearby that offered rent reductions of 30% or more.
Limitations and Alternatives
Why don't families make these moves? Lower rent usually comes with trade-offs. Cheaper units may be smaller, older, lacking modern amenities, or located in less desirable neighborhoods or inconvenient locations. The study does not evaluate qualitative neighborhood features like school quality or crime rates for each vacant unit.
Furthermore, while the study's geographic boundaries accurately represent distinct local communities, very rural areas can cover large physical distances, while dense urban areas may be compact enough that renters routinely cross administrative boundaries during a home search.
Why This Research Matters
If these findings are correct, high housing expense burdens are primarily driven by household choices to prioritize better living conditions, rather than an absolute lack of low-cost choices.
This distinction carries major consequences for public policy. Building new subsidized low-income housing projects is an exceptionally expensive endeavor. If low-cost housing is already present in private markets, government funds would be far better spent expanding tenant-based housing vouchers—which help families pay rent on existing units—or funding safety net programs like food assistance and healthcare.
Learn More
Paper Title: Rethinking Housing Affordability: Does the U.S. Have a Shortage of Affordable Housing?
Authors: Dirk W. Early and Edgar O. Olsen
Journal: Working Paper / Publication Draft
Publication Year: 2026
URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=7218738
Econ Today Explains
Economic Concept: Revealed Preference
Revealed preference is the economic principle that consumer actions reveal their true preferences better than survey answers or abstract assumptions. Rather than relying on what people say, economists look at how people actually allocate their limited resources when facing real choices.
In housing, if a low-income family chooses to pay $1,200 a month for an apartment despite having several $800 vacant options nearby, their behavior "reveals" that they value the superior quality, size, safety, or location of the costlier apartment more than the $400 in cash they could have saved for other expenses.
This article was written by AI but reviewed by a real human.
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