New Jersey’s high rents undermine efforts to reduce poverty

Rising rents consumed much of the benefit of increased food assistance, while a shortage of affordable homes leaves low-income renters with few options.

Housing costs account for about 28% of poverty in New Jersey, the third-highest share among states, according to new research by Zachary Parolin, an Oxford University professor who studies inequality.

Only Hawaii and California had larger shares of poverty attributable to housing costs. Washington, D.C., also ranked higher than New Jersey.

Between 1985 and 2023, rents in New Jersey grew by 48%, the seventh-highest increase in the country, while income grew by 32%, according to Parolin’s study.

“New Jersey is unusual in how widely income growth has fallen short of rent growth,” Parolin wrote in his study.

Efforts to reduce poverty often focus on increasing household resources through minimum wage increases, food assistance, the child tax credit and the earned income tax credit. Rising housing costs can absorb many of those gains.

In New Jersey, rent increases effectively consumed 84% of the increase in Supplemental Nutrition Assistance Program (SNAP) funding from 1989 to 2023, according to Parolin’s analysis.

Parolin examined housing costs using the U.S. Census Bureau’s Supplemental Poverty Measure, which accounts for household income, taxes, government benefits, and necessary expenses. Unlike the official poverty measure, it also adjusts poverty thresholds to reflect differences in local housing costs.

By accounting for local housing costs, the supplemental measure captures a distinction that a single national income threshold can miss: The same income does not stretch equally far in every community. In places where housing is more expensive, households generally need more resources to remain above the poverty line.

After identifying the states where housing costs account for the greatest share of poverty, Parolin calculated what would happen if rents fell 20% while other costs and demographic factors remained unchanged. He recalculated poverty thresholds under that scenario to estimate how many people would move above the poverty line.

For New Jersey, he estimated that the poverty rate would decline from about 12% to 9.5%, a reduction of about 20%. Families with children could see especially large benefits.

New Jersey’s shortage of affordable rentals is particularly severe for households with the lowest incomes. A March report from the National Low Income Housing Coalition estimated that nearly 300,000 renter households in New Jersey have incomes at or below the federal poverty guideline or 30% of their area’s median income, whichever is higher. For every 100 households in that category, the state has only 34 affordable and available rental homes, according to the report.

Pew housing researchers Alex Horowitz, Linlin Liang, and Liz Clifford examined Parolin’s findings alongside research on how expanding the housing supply affects rents. They concluded that policies allowing more construction could help reduce poverty by lowering housing costs.

Austin, Texas, and Minneapolis offer examples of how increasing the housing supply can improve affordability. Policymakers changed zoning rules and took other steps to allow and finance more homes. Inflation-adjusted rents subsequently fell by about 20% in both cities, according to the researchers’ analysis.

Some studies found that rents fell most sharply for older apartments and low-income neighborhoods following a surge in construction.

“As pro-housing policies to address restrictive zoning codes, building codes, and permitting processes have taken root in more states and cities, the question has arisen of whether those efforts benefit poor and working-class families or only middle-class and affluent ones,” the analysts wrote. “Parolin’s research helps answer the question: Lowering rents by adding more housing would help reduce poverty in states where housing is an especially large driver of cost-of-living expenses.”