Financial tools and resources, such as savings accounts and financial education empower residents to keep more of the money they earn, manage expenses, and increase generational wealth to support themselves and their families. The District is working to ensure residents are empowered to make sound financial decisions. This indicator group includes poverty rates, household income, debt in collections, sub-prime credit scores, and average credit utilization.

Poverty

Poverty is a national measure based on household size that indicates the minimum amount of income a typical household must have to meet its basic needs. Households with incomes below the federal poverty line frequently need financial assistance from government programs, such as affordable housing, food assistance, and childcare assistance to fulfill their financial needs. However, many assistance programs, such as affordable housing are severely underfunded by the federal government, which results in many low-income households not receiving enough resources to escape poverty.

The District is a leader among states in supplementing federal funding for these programs. Unfortunately, the District is not able to fully meet all needs with local revenue.

It is also important to consider that federal law requires that the poverty line is defined using a method developed in the 1960s, which focused on food costs. Today, housing costs represent a much larger portion of household spending than they did more than fifty years ago. This issue is especially significant in areas with higher-than-average housing costs, such as the District. As a consequence, this measure underrepresents the number of District households that do not earn enough to meet their needs. Still, this measure is useful because many federal programs that aid low-income households use the poverty line as a leading mechanism to determine eligibility.

 

 

 

Median Household Income

 

 

 

Credit Utilization

For many people, careful credit use is an important part of financial wellbeing. Credit use and health are important indicators of upward mobility from poverty because people who have access to low-cost borrowing are better able to finance education, spread the financial burden of large expenses over time, and purchase a home, which can be a pathway toward building wealth.

The map below includes three indicators of credit utilization and health: 1) the share of people with subprime credit scores, 2) the share of people with debt in collections, and 3) average credit utilization.

Areas with high concentrations of subprime credit scores indicate that residents’ expenses are very high compared to income resulting in higher rates of late payments and loan defaults. The second indicator, debt in collections, drills down further and highlights areas where financial distress is most common. The final indicator, credit utilization, is more nuanced. It shows areas where households use their credit at the highest level, which is an indicator of financial stress. Additionally, it reflects where residents have more access to credit and as a result use a lower percentage of their available credit.