Visualizing the Housing Cost Burden of Migrants and Natives across the Income Distribution

Abstract

A majority of German households are occupied by renters. There are indications of growing inequality through disproportional income increases among high-income households and disproportional rent increases among low-income households. On the basis of the German Socio-Economic Panel, the author examines rent-income ratios (RIRs) and differentiates between migrants and natives. How did RIRs develop between 1990 and 2020, and are there any differences across the distribution? There are three key findings. First, dynamics of RIRs suggest rising economic inequality among both migrants and natives. Second, although both groups grew more unequal over time, the inequality increase was stronger among migrants. Third, migrants generally faced steeper rent hikes than natives, which partly accounts for a higher rent burden among income-poor migrants. These descriptive findings point out avenues for systematic research of the increases in inequality related to rent and income dynamics and their ethnoracial stratification.

This visualization features the proportion of income spent on rents in Germany. Compared with the United States, where just 33 percent of households are occupied by renters, 54 percent of Germany’s households are occupied by renters (OECD 2024). How much of their incomes do they spend on housing? In line with recent research, this study goes beyond official binary definitions of rent burden (Colburn et al. 2024). It builds on findings indicating that low-income households have suffered disproportionately from rent price increases and real income losses, whereas high-income households have benefited disproportionally from real income increases in Germany (1993–2013) (Dustmann, Fitzenberger, and Zimmermann 2022). The resulting rent-income ratios (RIRs) have stagnated for high-income households and increased from high levels for low-income households. This visualization shows how RIRs have developed for migrants compared with natives across three decades (1990–2020). It relies on individual survey data from the German Socio-Economic Panel (DIW Berlin 2023). The plots map the dynamics of RIRs and their components over time, across quintiles of each year’s unconditional net equivalent household income distribution, and for migrants and natives. I omitted the second through fourth quintiles to make top-bottom inequality more easily discernable (see the Online Appendix for details).

Figure 1A shows equivalent rent changes with respect to 1990. Starting with commonalities, rents increased across the board chiefly during the 1990s and after 2015. Yet the relative increase has been stronger in both quintiles among migrants compared with natives. Migrants faced rent increases of 50 percent to 80 percent, whereas natives saw comparatively smaller increases between 25 percent and 40 percent through the observation period. Overall, rent dynamics point upward, but the increase has been stronger among migrants.

Figure 1.

Rent change, income change, and rent-income ratios at the bottom and top quintiles of the income distribution.

Figure 1B shows relative income changes with respect to 1990. The pattern is one of increasing inequality in both groups, but the gap opened wider among migrants. This is attributable to higher real income gains at the top and higher real income loss at the bottom. Also, natives’ real incomes in the bottom quintile slightly recovered in the final period, whereas migrants’ incomes did not.

Figure 1C shows that RIRs follow similar patterns in the two groups. There was a universal increase in RIR, but only individuals in the bottom quintile crossed the 40 percent RIR threshold of the European Union’s rent over burden definition. Also, RIRs have become more unequal within groups, driven mainly by increases at the bottom of the distribution, which were more pronounced among migrants.

There are three key messages. First, the dynamics of RIRs suggest rising economic inequality among both migrants and natives. Real income developments have not mirrored rent increases except for top incomes. Real income losses at the bottom caused disproportional increases of RIRs in that part of the distribution. Second, although both groups grew more unequal over time, the inequality increase was stronger among migrants. That is, relative income gains were stronger at the top and relative losses were stronger at the bottom of the distribution compared with natives. Third, migrants generally faced steeper rent hikes than natives. Low-income migrants swallowed real rent increases of 50 percent between 1990 and 2020, whereas the relative increase among low-income natives was “merely” 25 percent.

These descriptive findings indicate that migrants’ RIRs started in 1990 from lower levels than natives’ RIRs but matched them by 2020 after increases in both groups. Behind these trends, are several developments which partly counterbalance each other. Both migrants and natives faced rent increases across the distribution, but the hike was steeper among migrants. In parallel, incomes have become more polarized, but the polarization has been more accentuated among migrants. As a result, both groups have seen their rent burden increase, but migrants more than natives. Rich renters did partly compensate rent increases through real income gains, whereas poor renters suffered real income losses in addition. Overall rent and income dynamics increased social inequality in particular among migrants. That is shown by the steep hike in rent burden at the bottom of the income distribution.

The aim of this visualization is to inspire research that seeks to decipher the mechanisms behind the inequality increase and its ethnoracial stratification in Germany and beyond. Understanding the group-specific drivers of RIR inequality will be crucial for our judgment of whether the dynamics are as alarming as they seem. Promising research avenues include the dynamics and ethnoracial differences of dwelling quality, neighborhood characteristics, and the changing composition of migrant populations.

Supplemental Material

sj-pdf-1-srd-10.1177_23780231241298806 – Supplemental material for Visualizing the Housing Cost Burden of Migrants and Natives across the Income Distribution

Supplemental material, sj-pdf-1-srd-10.1177_23780231241298806 for Visualizing the Housing Cost Burden of Migrants and Natives across the Income Distribution by Nils Witte in Socius