Housing cost burden and life satisfaction.

Abstract

The share of income spent on housing varies across individuals and countries but it has been increasing over time in a wide range of countries, particularly among lower income households, rising housing affordability as a prominent challenge in higher income economies. Variations in share of income spent on housing can reflect variations in household preferences but when more than a certain level of income is spent on housing, households face tradeoffs between housing and non-housing consumption that are expected to negatively affect their overall life satisfaction. Using data from the 2018 European Union Statistics on Income and Living Conditions (EU-SILC) for 14 countries we find that, controlling for household sociodemographic characteristics, households spending more than 30 percent of their income and those spending more than 50 percent of their income on housing report lower levels of life satisfaction, with the latter group reporting the lowest level. The negative relationship between housing cost burden and reported life satisfaction is found across countries but varies in magnitude, which points to the need to further investigate the mechanisms behind the association between housing cost burden and life satisfaction and the role of country-specific effects, including differences in welfare systems, in moderating this association.