Housing 'Affordability'? It's Relative to Working Households

This Article is taken from Realty Times and is written by Broderick Perkins

Don't talk about housing "affordability" to more than a quarter of America's working stiffs.

Sure, home prices remain well off housing boom peak prices, and are relatively affordable.

Certainly, you can purchase distressed properties in many locations for a song. Bargains abound.

However, if you can barely afford to cost of your current housing, big whoop.

More than 26 percent of working renters spend more than half of their household take-home pay on housing - and those costs are rising.

 

The Center for Housing Policy's (CHP) annual "Housing Landscape" report tracked working households' housing costs from 2008 to 2011 and found that nearly one in four of all working households (renters and owners) spends more than half of its income on housing.

It also found that the share of working households with a severe housing cost burden increased significantly between 2008 and 2011, rising from 21.8 percent to 23.6 percent.

The report defines a working household as one with an income less than 120 percent of the median for its area, and with household members working at least 20 hours per week on average.

What housing recovery?

For these Americans the housing recovery doesn't amount to a hill of beans. It isn't moving fast enough to help the economy create more, higher paying jobs - or stem the tide on rising rents.

America's working renters saw their housing costs rise by 6 percent from 2008 to 2011, while their household incomes fell more than 3 percent. Among working renter households 26.4 percent of them spend more than half of their income on housing.

"While rental costs have steadily risen over the last few years, wages for these working families have not fully recovered from the hit they took between 2008 and 2009. Spending most of your paycheck on rent means cutting back on other necessities, including healthcare and even food," said Janet Viveiros, a researcher at CHP, who also co-authored the report.

Owning vs. renting

Maya Brennan, also a report co-author, said the housing crisis has contributed to rising housing costs for working renters. The increased demand for rental housing is largely due to the crisis on the homeownership side of housing where millions who lost homes were forced to rent.

Unfortunately the supply of rental homes hasn't kept pace with the demand and that imbalance has contributed to higher housing costs, especially for renters.

"What we're seeing with the rental market is not explainable by population trends alone - it clearly reflects the movement of former homeowners into rentals as well as delays in home purchases by current renters," along with slow new housing starts, Brennan explained.

The report also says working homeowners, who managed to hang onto their homes, avoided the upswing in housing costs renters suffer, but they too struggle with unemployment, reduced unemployment and falling incomes.

While renters suffered a 6 percent rise in housing costs, homeowners' housing costs actually dropped by 3 percent over the study period, but during the same period, homeowners' household incomes fell 4 percent, compared to only 3 percent for renters.

Regional differences

CHP's report also pinpointed hardest hit areas.

Between 2008 and 2011, the share of working households with a severe housing cost burden increased significantly in 24 states and decreased significantly in only one state: South Dakota.

Among the 50 states and the District of Columbia, the following five had the highest share of working households with a severe housing cost burden in 2011:

  • California, 34 percent.
  • Florida, 32 percent.
  • New Jersey, 32 percent.
  • Hawaii, 30 percent.
  • New York, 30 percent.

Among the 50 largest metropolitan areas, the following five metropolitan areas had the highest share of working households with a severe housing cost burden in 2011:

  • Miami-Fort Lauderdale-Pompano Beach, FL, 41 percent.
  • Los Angeles-Long Beach-Santa Ana, CA, 39 percent.
  • New York-Northern New Jersey-Long Island, NY-NJ-PA, 35 percent.
  • Orlando-Kissimmee-Sanford, FL, 35 percent.
  • San Diego-Carlsbad-San Marcos, CA, 34 percent.

Published: May 8, 2013