Housing affordability and investments in children

This paper uses the 2004-2009 Consumer Expenditure Surveys to examine whether housing affordability affects expenditures on children in families with income at or below 200% of the poverty line. After accounting for selection using propensity score matching, estimating effects using nonlinear GLM, and performing sensitivity tests, we find that child enrichment expenditures have an inverted U-shaped relationship with housing cost burden, our measure of housing affordability. This result is similar to the concave pattern of the association between housing cost burden and measures of children's cognitive achievement in reading and math. Thus, child expenditures, particularly for enrichment, may be one mechanism by which housing affordability affects children's cognitive outcomes. The inflection point for enrichment spending occurs at roughly the 30% housing cost-to-income ratio, the longstanding rule-of-thumb for defining housing affordability.