Housing costs among low-income renters and homeowners: "Rent V. Buy" and the hidden costs of low-income homeownership

Much government policy in recent years has been directed at increasing homeownership among low-income households. Many have argued for the unconditional acceptance of increasing low-income homeownership as an important policy goal. However, evidence from household expenditures in the Consumer Expenditure Survey suggests many difficulties of this conceptually appealing target. Low-income homeowners are more likely to purchase homes with proportionally higher "hidden" ownership costs such as maintenance and utilities. Further, tax policies direct homeownership benefits towards high-income households, often generating no tax deductions for low-income households. Because of these distinctions, currently available consumer information on "rent v. buy" calculations can be particularly misleading for low-income households. Government policies mandating increased lending to low-income households combined with the realities of housing costs differences for these households may have ultimately contributed to the current mortgage default crisis.