Despite improved
housing affordability, housing costs still a burden.
The continuing economic
recovery has improved housing affordability for low and moderate income
working households, but housing costs are still a significant burden,
especially to renters, according to a new report by the Center for Housing
Policy, the research division of the National Housing Conference.
The report, “Housing Landscape 2014,” finds that after peaking at 23.7 percent
in 2011, the share of working households with severe housing cost burdens fell
in 2012 to 22.1 percent. Renters are much more likely to be severely cost
burdened—25.4 percent of working renters spent more than half of household
income on housing costs, compared to 18.6 percent of working homeowners.
Most of the affordability
improvements between 2009 and 2012 were among homeowners who benefitted from
falling housing costs, as many were able to modify or refinance their mortgages
at lower interest rates or buy homes at
low prices.
The widespread
affordability challenges have implications for the country’s economy as well as
for the welfare of individual households. “Working households who spend half or
more of their income on housing costs have difficulty keeping up with other
essential expenses, like food, healthcare, and transportation,” said Dr. Lisa
Sturtevant, Director of the Center. “Spending on non-essentials will also go down
when households spend a disproportionate share of their income on housing.
Lower household spending is a drag on the slowly recovering economy.”
Working households are
defined in the report as households whose members work a total of at least 20
hours per week on average, and where household income does not exceed 120
percent of the area median.
Widespread
Improvements Mask Regional Challenges
Between 2009 and 2012,
housing affordability improved in 13 states, mostly in the Midwest and West
where in many regions, the for-sale market has not yet fully rebounded and
owner costs continued to fall. However, in New York State, the share of working
households with severe housing cost burdens actually increased between 2009 and
2012, and in 36 states (and the District of Columbia) there was no significant
improvement, implying that there much of the nation is still recovering from
the financial crisis.
While median renter
incomes have increased faster than their median housing costs over the past
three years, the share of severely cost burdened working renters was still
higher in 2012 than at the end of the Great Recession in 2009. While between
2009 and 2012, median housing costs for working renters rose 3.9 percent and
median incomes rose 5.1 percent, only in 2012 did the share of severely cost
burdened working renters decline for the first time since the end of the
recession, from 26.4 percent to 25.4 percent.
“The increase in renter
incomes is certainly positive, but we don’t know what the future will bring,”
said Janet Viveiros, Center for Housing Policy research associate and lead
author on the report. “Without an increase in the number of available rental
units over the next few years, particularly where demand for rental housing is
high, rents will continue to increase. If incomes stagnate or don’t match the
increase in rents, we could see even more working renters with severe housing
challenges. It is important to remember that a quarter of all working renters
are still severely cost burdened.”
Housing Landscape 2014
also finds that the lowest income households continue to experience the
greatest housing cost burdens. Nearly eight in 10 extremely low-income working
households—those earning 30 percent or less of the area median income—are
severely cost burdened, and over a third of very low-income working
households—those earning 31 to 50 percent of the area median income— face
severe housing cost burden.
These figures likely
underreport the cost burden experienced by low-income households, as underemployed
and non-working households, such as those including seniors and persons with
disabilities, are not counted in this analysis.
“While the cost burden
faced by many renters and homeowners are significant, America’s housing
affordability obstacles are not insurmountable,” said Chris Estes, President
and CEO of the National Housing Conference. “Preserving federal assistance for
the lowest income renters, protecting and expanding housing production programs
like the Low-Income Housing Tax Credit and the National Housing Trust Fund, and
ensuring that low-and moderate-income first-time homebuyers have access to
affordable, safe mortgages are clear ways to improve stability of families and
our economy.”
View the report online at http://www.nhc.org/media/files/Landscape2014.pdf
State and Local Findings
Among the 50 states and the
District of Columbia, the following five had the highest share of low- and
moderate- working households with a severe housing cost burden in 2012:
o
California 32%
o New
Jersey 31%
o
Florida 30%
o
Hawaii 30%
o New
York 29%
Among the 50 largest
metropolitan areas, the following five metropolitan areas had the highest share
of low- and moderate-working households with a severe housing cost burden in
2012:
o Miami-Fort
Lauderdale-Pompano Beach, FL 39%
o Los
Angeles-Long Beach-Anaheim,
CA 38%
o New
York-Newark-Jersey City,
NY-NJ-PA 35%
o San
Diego-Carlsbad,
CA 32%
o
Orlando-Kissimmee-Sanford,
FL 32%
Source: National Housing
Conference, www.nhc.org
This article appeared in REAL Trends Newsletter and is being reprinted with permission of REAL Trends, Copyright 2014.