Beyond Rent: Understanding the peripheral costs of units leased by low-income households

By Jasmin Dial & Abbey Vannoy

Rents are the go-to indicators for understanding the cost of leased housing in the U.S. But the actual cost of a unit - be it a single-family home, apartment, or any unit in between - is a complicated nexus of mandatory fees and expenses from initial application to deposits to utilities. To understand the hurdles to affordable housing, notably for low-income households including Section 8 voucher holders, policymakers and agencies need robust data beyond rents.

Data Sourcing & Context

Our data partnership with AffordableHousing.com allows Learning Collider to uncover market trends and household behaviors, specifically those of low-income families and Section 8 voucher holders. Real-time data opens up opportunities to support tenants, improve tenant protections, and refine the policies needed to advance fair and affordable housing. This post summarizes key data insights from our joint presentation to the White House and HUD in late 2022. 

Different Demographic Groups face Different Fees & Deposits

Housing policies and programs tend to orbit around the month-to-month expense of rent. But to get to that cyclical 1st-of-the-month payment, renters must overcome the financial hurdles of applying to and securing units. 

It’s important to note here that our research partner, AffordableHousing.com, does not charge tenant users. But, as with offline transactions, property owners charge upfront application fees and require deposits to hold properties and/or provide some protection from property damage. Both fees and deposits vary by landlord and unit type.

Our analysis of nearly 500,000 rental applications shows that application fees and deposits encountered by applicants vary by demographic group.

Higher Upfront Costs are Observed for Black & Hispanic/Latinx* Applicants

Black applicants, both voucher holders and non-voucher holders, apply to units with both higher fees and higher deposits than white applicants. Black applicants also apply to 50% more units and pay nearly $55 more in total application fees than others. Tangentially, Black applicants are more likely than other demographic groups to apply to single family homes and other low-density units (townhome, duplex, triplex, and similar).

Another hypothesis is that Black applicants have experienced systemic discrimination in their search for housing, responding by applying to more units and different types of units to increase their chances of one successful application. While concerning, there is an opportunity to test for disparate treatment and disparate impact, and to respond quickly with tenant protection policies.

On top of dealing with higher fees, Black applicants face the highest deposit-to-rent ratios with a median deposit of $1,400, 14% higher than white applicants. This again might be a function of the type of low-density units Black applicants are seeking.

Hispanic/Latinx applicants experience slightly higher fees than white applicants and drastically higher median deposits: $1,600, 30% above their white counterparts. Black and Hispanic/Latinx deposit amounts are close, or equal, to the monthly rent. But for white applicants, the typical amount is 6 percentage points less.

Simply put, our analysis shows that Black and Hispanic/Latinx applicants in search of affordable housing have more upfront financial burden, e.g. more cash tied up in deposits.

It’s again important to note the variation across demographic groups may only be a function of property types. But other factors might be playing a role. These findings are a pathway to further analyses through Learning Collider’s partnership with AffordableHousing.com. We can build on each data point through large-scale user surveys and more detailed analyses by geography and property type.

Section 8 Voucher Holders Also Face Higher Upfront Costs

Analyzing the data from another angle, we observed differences between Section 8 voucher holders and non-voucher holders. Voucher holders submit twice the number of applications and pay higher application fees compared to non-voucher holders. Their total application fees reach $180 on average, $100 more than their counterparts. Voucher holders also pay substantially higher deposits at a full 1-to-1 deposit-to-rent ratio.

In thinking through the experiences of new voucher holders, some variability could be explained by their expanded, higher-quality options. Vouchers can help stretch the holders’ portion of rent. In other words, voucher holders might be looking at higher-value units that would command higher upfront costs.

However, the need to apply to 4 units versus 2 units is concerning. As we’ve investigated in recent AffordableHousing.com user surveys, voucher holders face discrimination by landlords, sometimes being turned away from unit inquiries in areas where Sources of Income (SOI) laws prohibit landlords from doing so.

The key finding from this angle of the analysis is that voucher holders experience higher application fees and significantly higher security deposits than non-voucher holders. Importantly, voucher holders do not receive financial support through the Section 8 Housing Choice Voucher program for application fees or deposits. This can put significant strain on low-income households with very limited cash reserves, especially when coupled with moving expenses and the overall cost of experiencing housing insecurity.

Rent is, of course, still critical 

As Learning Collider and AffordableHousing.com continue to analyze data on how different applicants experience the housing search process, we continue tracking rent trends.

Late in 2022, we observed national median rents cooling but not decreasing. But even with rent increases slowing, those households in search of a new address are looking at much higher rents than where they currently live. For example, households in search of Section 8-approved housing apply to units that are, on average, $700 more per month than where they currently live. A number of factors likely drive this differential:

• Voucher holders’ support from the Section 8 program can help them secure better housing

• Newly issued vouchers lead to a larger differential where holders lived in temporary housing situations with under-market rents (e.g. paying a friend or family member for short-term stays)

• Voucher holders may be more confident in their search for housing, applying to units they may not ultimately be able to secure

For non-voucher holders, whose income is not stretched by Section 8, the current and applied-to rent differential is $350. Annualized, this is an expense hike of $4,200 for low-income households. Some of the reasoning could be inflation and increased wages, particularly for hourly jobs. But certainly, rent increases have been a market trend we’ve seen over the past several months and a challenge for low-income households.

From Data to Action

As noted above, the data Learning Collider observes and analyzes can be concerning yet actionable. Our ongoing partnership with AffordableHousing.com opens pathways for targeted surveys, centering the voices and experiences of people using the platform to find and secure an affordable unit. Paired with user analytics and market trends, our researchers and data scientists uncover real-time insights to inform policies and principles, making real and immediate impacts on the housing and economic mobility outcomes for low-income families.

*Note: Terms to describe demographic groups are imperfect and evolving. In this article and others, our usage of Hispanic/Latinx includes people who identify as Hispanic and/or Latino, Latina, Latine, and Latinx.