Housing insecurity is a major issue for today’s workers. As housing costs continue to rise, working class people are struggling to find and retain housing. The resulting precarity can have broad financial implications.
A 2016 Harvard University study found a correlation between housing insecurity and job insecurity. For low-wage earners, an unstable housing situation can lead to unemployment, triggering further obstacles to long-term financial stability. In turn, lack of financial stability makes it difficult to secure and keep housing. This creates “double precarity,” as the negative effects of unstable housing and unstable employment amplify each other.
The Harvard study found that workers who had been forced to move were 11–22% more likely than their peers to experience a subsequent job loss. “This study identifies involuntary displacement as a previously overlooked mechanism of social stratification,” the researchers wrote. “Forced removal from housing may serve as a crucial turning point in the lives of poor working families, with eviction leading to job loss, which in turn can result in durable earnings losses and nontrivial negative health outcomes.”
A Growing Problem
Demand for affordable housing continues to grow amid skyrocketing rents, which have outpaced wage growth in recent years. The annual income of a renting household is only $37,900 and nearly 11 million American rental households have incomes below the federal poverty threshold, according to the Harvard University Joint Center for Housing Studies.
Because these households tend not to have cash reserves, a minor financial shock like an unexpected medical bill or a car repair expense can leave them behind on rent and at risk for eviction. Stress caused by housing insecurity can lead to distraction at work or even unpaid missed workdays, both of which undermine performance and thus increase the likelihood of job loss. The resulting unemployment then makes it harder to maintain housing—or regain it if it’s lost—since landlords are typically reluctant to lease to those who lack a steady income stream to cover rent.
A Role for Investors
Due to the link between housing and job security, investors who want to improve the lives of working people in the United States may want to consider investing in and advocating for increased affordable housing. With the growth of several socially motivated real estate investment trusts and other funds focused specifically on affordable housing, opportunities have become increasingly available in recent years, as the Urban Land Institute reported.
At the same time, the government’s Low-Income Housing Tax Credit may help offset any below-market returns resulting from renting property at subsidized rates. These credits may allow some investors to more confidently put money into affordable housing projects. If plans to lower the corporate tax rate go through, however, the value of these credits could decrease, making the financial case for such investments less appealing.
Yet, affordable housing is more than just money for socially minded investors. It is a crucial issue for any individual or organization looking to promote economic mobility and address income inequality. Many large philanthropic funds already recognize the value of affordable housing. The MacArthur Foundation’s $150 million initiative Window of Opportunity: Preserving Affordable Rental Housing aims at preserving and improving affordable housing throughout the country, for example, while the Ford Foundation has highlighted affordable housing as a major focus of its $1 billion mission-related investments endowment.
In addition to building more affordable housing to counter rising rents, investors in all sectors may want to consider using their positions as shareholders to encourage employee policies that allow workers to better weather evictions and other forced relocations. For example, a paid leave policy can let workers take time off to deal with a housing crisis instead of missing work without pay or trying to get through a shift when they are in distress. Shifting assets toward companies that actively promote work-life balance and employee wellness can improve outcomes for low-wage earners.
Alleviating the double precarity of housing insecurity and job loss can help not only working class and poor individuals, but may aid in reversing the long trend of surging housing costs and stagnating wages, making a difference in the wider economy.