Expenditures for Shelter *

A family may buy shelter either by purchasing a dwelling or by renting it. The shelter costs of owners are of two kinds, the cost of acquisition and the continuing cost of ownership. After a dwelling has been purchased the owner must make expenditures for taxes, assessments , repairs and upkeep, and for insurance to protect his investment. There are other costs of ownership which do not involve expenditures. These are: depreciation, that is, the loss of value as the structure wears out and becomes unfashionable or out-of-date and as the neighborhood deteriorates; interest on the money invested in the property; and the time required for managing it. Once a house is purchased its cost to the owner is fixed as to these items, although the total annual sum in terms of dollars cannot be determined ahead of time, since taxes and repairs vary, it cannot be foreseen when assessments will come or how much they will be, and depreciation, while inevitable, may be rapid or slow, depending on several factors. Renters purchase shelter on a month-to-month basis and know exactly what it costs them; they are able to control their expenditures for this item because, although rents rise and fall, as a rule they can always find shelter at prices they can afford. What a family can afford to pay for shelter depends largely upon its income. Economists suggest that the purchase price of a home should not be more than from one and one-half to two and one-half times the annual income and that not more than 20 per cent of the income should be allotted to rent, unless some of the operating costs, such as heat, are included. If more than this is paid for shelter, the family may find itself uncomfortably restricted as to other expenditures. Some authorities believe it advisable that the purchase price of a house should not be more than one and one-half times the income when the latter is $3,000 or less and that only on incomes of $10,000 or more is it safe to buy a house the price of which is two and one-half times the income.