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Growing Number of Americans Can’t Afford to Buy or Rent

Growing Number of People Can’t Afford to Buy or Rent

More households than ever spend over half their income on housing. Rental housing costs increased by six percent from 2008 to 2011, while renters’ incomes dropped by over three percent during the same time. Financial experts recommend spending less than 30 percent of income on housing, including utilities. Mortgage lenders cap the combined cost of mortgage payments plus taxes and insurance at 28 percent. No significant change in monthly payments or incomes occurred for homeowners during that time.

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Who is affected?

Recent studies indicated over 20 percent of American households spend greater than half their income on housing. For renters, this number exceeded 26 percent in 2011. The national median income for working homeowners was only 80 percent of the median income for all US homeowners in 2011. Working homeowners faced greater affordability challenges than higher-income owners. Working renters represent nearly 60 percent of all renter-occupied households. Rising housing costs for rental properties worsened affordability for renters from 2008 to 2011

Why is this happening?

In many cities, people cannot afford either to buy or to rent a home. The reasons are familiar: unemployment rates, foreclosure rates, and low-income levels, income disparity between low and high wage earners, high housing costs, and high demand for low-cost housing. The worst hit cities do not cluster on the coasts or in high population centers such as New York and Los Angeles, although those cities appear on the lists. Working people in the middle of the country suffer as much as elsewhere.

Hardest Hit Cities

Some cities with particularly high rates of affordability challenges:

Memphis, TN reported homelessness increased 20 percent in the last year. Average annual income for a household in Memphis is approximately $4,000 less than the national average.

New Orleans, LA suffers from very high income inequality compounded by a lack of affordable housing for low-income residents since Hurricane Katrina

Miami, FL hosts the highest number of rental households (65 percent) relative to its total housing units among all cities.

Washington D.C. Metro Area Cities like Arlington, and Alexandria enjoy the seventh highest median household income of all 580 metro regions looked at, at $107,500. The approximated income renters in the area is less than half that, at only $52,599

San Benito County, CA renters need to earn $23.15 per hour to pay for a two-bedroom apartment. Based on the current mean wage in the county, workers must labor as much as 100 hours every week to afford the current rental prices there.

Boston Metro Area Cambridge, Quincy, and nearby N.H. workers earning the minimum wage must work 145 hours per week to afford a two-bedroom rent. Orange County CA workers must work 159 hours each week based on earning minimum wage to be able to rent a two-bedroom apartment based on current market rates. Santa Cruz-Watsonville, Calif. renters need to work 145 hours each week at minimum wage to earn enough income for rent.

Outlook for Renters and Homeowners

Renters and homeowners earn less today than prior to the economic downturn. Renters earning less than 30 percent of the mean income grew by 900,000 from 2007 to 2010. Of 582 metropolitan regions, only 37 have met this goal. In most parts of the country, rental and home ownership costs vastly exceed 30% of working household income.

In the ten geographic areas with the largest rental affordability gaps, average working households need 70 percent more in earnings to ensure only 30 percent of their salary goes toward housing costs. Even if the working household earned the average income for their specific location, one would be required to work more 80 hours per week to afford their local housing costs.

The questions for economists, government and community leaders, employers and employees remain:

• How can business sustain itself with workers priced out of the area?
• How can workers maintain their homes or locate affordable housing?
• Should the U.S. increase the minimum wage?
• Should he U.S. regulate housing costs to improve affordability for workers?
• How will society manage the long-term effects of housing insecurity on children, families and communities?

Photo Credit:  Phil Sexton