Renters at the Crossroads of the Housing Crisis and Medicaid Policy

Both 2024 presidential candidates have proposed plans to address two critical issues facing American voters: the US housing affordability crisis and reforms to Medicaid and Medicare. However, millions of Americans are affected by both challenges, and policy changes to address one issue could indirectly affect the other.

Many US renters today are effectively trapped by an exogenous housing shortage. As housing demand surged during the pandemic years, home prices and rents rose sharply in previously more affordable metros as new residents flocked to cheaper markets. Between January 2020 and July 2024, the average US rent rose by 32.2%, while the average rate on a 30-year fixed-rate mortgage roughly doubled over the same period.

Consequently, millions of renters find themselves both priced out of buying and struggling to absorb increasing rents as wages race to keep pace. However, with the average price of goods and services up by 21.5% since the start of 2020, rising housing costs are just one piece of the pandemic-era inflation story.

The cost of medical services is another piece. According to the Bureau of Labor Statistics, the price of medical care has risen by 11.2% since the start of 2020. A recent uptick in Medicaid enrollments, a program designed to provide health coverage to people with limited income and resources, illustrates the cascading effects of rising living costs.

Using data from the Census Bureau’s American Community Survey, we find that after considerable enrollment declines in 2019 and 2020, 35.9 million people were enrolled in Medicaid in 2021, up by nearly 3 million compared to the year before. While enrollments fell slightly in 2022, it was still more than 700,000 people above 2019's level.

The crossroads of these cross-pressures become clearer when we observe Medicaid's prevalence among the renter population. More than one-third of all renters are Medicaid recipients. Compared to homeowners, who, by acquiring and holding a value-generating asset, are more likely to grow their wealth over time, renters—all else equal, lack this wealth vehicle and are proportionally more reliant on Medicaid’s insurance safety net.

The significant share of renters using Medicaid illustrates how lower-income groups have been disproportionately affected by the rise in living costs in recent years. An analysis by the Federal Reserve finds that during the post-pandemic inflationary period, the poorest households saw prices rise about two percentage points more than the richest ones—or about 8.3% faster than the average consumer price index (CPI) over this period.

Meanwhile, Medicare recipients are less numerous among renters but remain a sizable chunk. Through 2022, 12.5 million renters are enrolled in Medicare, representing about 12% of the renter population.

As a program for American seniors who are, on average, more likely to own than rent—Medicare’s tepid use among US tenants makes sense. Nevertheless, the US senior population is growing, and as more retirees opt to remain in their homes rather than relocate to senior-living communities, housing supply pressures may continue.

Supply-side solutions that slow down rent inflation relative to incomes would assist with upward mobility and increase the opportunity for renters to move out of the Medicaid income threshold. Similarly, Medicare reforms that address costly long-term care for seniors could help dampen the growing medical debt load by American seniors, which, left unchecked, could exacerbate problems of housing access.