Global: Affordable Housing Is Associated with Greater Spending on Child Enrichment and Stronger Cognitive Development

Housing affordability has long been a concern of government. As far back as the 1930s, President Roosevelt promoted affordable housing, including creating the Home Owners Loan Corporation to protect small homeowners from foreclosure. In the 1940s, federal policymakers formalized a rule of thumb widely used by bankers and others that set “affordable” in government housing policy as “a week’s wages for a month of rent,” or about 25 percent of monthly income. That rule of thumb albeit now at 30 percent continues to guide federal housing policy, although it was never empirically put to the test. On average, the modest-income families in the study spent about $4,000 a year on their children between 2004 and 2009, including necessities and enrichment activities. Approximately $1,000 of that amount is for enrichment items alone. Only a small fraction of these families, approximately one in ten, spent nothing on child enrichment. A family spending approximately 30 percent of its income on housing spent about $125 more on their children’s enrichment activities per year than those who spent 10 percent of income on housing, and $50 more than those who spent half their income on housing. (A family that devoted 10 percent of its income to housing spent approximately $800 annually on child enrichment, while a family devoting 50 percent to housing spent approximately $875). Interestingly, at 60 percent, spending declines dramatically and at a much faster rate.