There are many policies that reduce the supply of goods and services that parents and children need, and therefore lead to rising costs for family necessities like food, housing, clothing, transportation, and childcare. Policies including tariffs, regulations, and licensing rules reduce affordability, while the value of parents’ wages erodes due to historically high inflation.
However, housing arguably constitutes the most substantial and most inescapable financial cost associated with raising a child. U.S. Department of Agriculture figures indicate that for families, the cost of housing is the largest expense associated with raising a child, with estimates suggesting housing accounts for 26 to 33 percent of child rearing expenses, which translates to approximately $3,000 to $7,000 annually (2022 dollars).
The cost of housing as a proportion of overall childrearing expenses grows as income falls, so that for families with the lowest incomes the cost of housing constitutes a more substantial portion of childrearing costs. Moreover, although housing affordability metrics arguably overcount affordability problems due to flawed or missing income survey data, using a traditional affordability metric Department of Housing and Urban Development (HUD) data indicates that around 30 percent of children in 2019 lived in households with a housing cost burden over the traditional 30 percent affordability threshold.
During the pandemic, the costs of homeownership and rent grew further and created additional pressure on family budgets as supply chain delays and labor shortages produced upward cost pressures. And unfortunately, in 2022, housing affordability remains low: for example, the National Association of Homebuilders/Wells Fargo Housing Opportunity Index found that just 42.2% of homes sold in Q3 were affordable to families earning the U.S. metropolitan median family income of $90,000. This constitutes the second quarterly record low for housing affordability since the Great Recession.
Although some of the causes of price growth were related to pandemic‐specific circumstances, other factors contributing to housing affordability challenges were and are worsened by ongoing federal, state, and local policy. These factors are summarized below and described in greater detail in the Cato Handbook for Policymakers Housing Affordability chapter, and forthcoming Empowering the New American Worker chapter by the same name.
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