Center for Housing Policy

NEARLY A QUARTER OF WORKING HOUSEHOLDS SPEND MORE THAN HALF THEIR INCOME ON HOUSING
Shrinking incomes outpace falling homeownership costs; renters face rising costs on tightening household budgets
A new study by the Center for Housing Policy confirms that falling home prices have not solved the housing affordability problems of the nation's working households. In fact, the Center's Housing Landscape 2012 report found that the share of working households paying more than half their income for housing rose significantly between 2008 and 2010 for both renters and owners. This annual report explores the latest Census data from 2008 to 2010 on housing costs and income, including housing cost burden data from the 50 largest U.S. metropolitan areas, all 50 states and the District of Columbia. Among other conclusions, Housing Landscape 2012 finds that nearly one in four working households in the U.S. spends more than half of total income on housing.

Housing cost burden for working households grew over the two-year period studied largely due to falling incomes and rising rental housing costs. Report author Laura Williams says rents rose due to increased demand for rental housing which has outstripped supply, partly due to the crisis on the homeownership side of the market.
"More and more people are interested in renting," Williams remarked. "Some prefer it because it allows them to be more mobile in a tough job market. Others are postponing purchasing a home or facing difficulties obtaining a mortgage. Given the long lead times involved in responding to increased demand with increased supply, the rental market has tightened somewhat and rents increased."

For working homeowners over the same two-year period, incomes slid more than twice as much as housing costs. In fact, incomes for working homeowners fell even more sharply than they did for working renters. Jeffrey Lubell, executive director of the Washington-based Center for Housing Policy, said this phenomenon was primarily due to a drop in average hours worked among moderate-income homeowners.

"The data show that homeowners have been hit hard by the housing crisis in more ways than just lost equity," Lubell explained. "Many working homeowners have been laid off or had their hours cut."

Additionally, the housing costs of most working homeowners are still tied to homes bought before the sharp drop in home prices and thus do not reflect today's lower home purchase prices.

"Most of today's homeowners bought their homes at a time when housing prices were much higher than they are today," Lubell continued. "As a result, their housing costs have not declined nearly as much as you would expect from looking at the broader market declines in home sale prices."

Read the Housing Landscape 2012 report

Key National Findings
Nearly one in four working households spends more than half of its income on housing. The share of working households with a severe housing cost burden increased significantly between 2008 and 2010, rising from 21.8 percent to 23.6 percent.
Despite falling home prices and values, housing affordability worsened for working homeowners. Median housing costs for working homeowners declined modestly between 2008 and 2010. Meanwhile, the incomes of working homeowners declined even more, driven in large part by a decrease in the median number of hours worked per week between 2008 and 2010.
Working renters fared even worse, with both increased rents and decreased incomes between 2008 and 2010. While incomes increased somewhat between 2009 and 2010, over the two-year period renters saw a four percent decline in household income. The housing costs of renters rose over the two-year period by four percent.
State and Local Findings
Between 2008 and 2010, the share of working households with a severe housing cost burden increased significantly in 24 states and decreased significantly in only one state: Maine. Eight other states that saw no significant increase in the percentage of such households already had steadily high rates of severe housing cost burden.

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 2010:

California 34%
Florida 33%
New Jersey 32%
Hawaii 30%
Nevada 29%

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 2010:

Miami-Fort Lauderdale-Pompano Beach, FL 43%
Los Angeles-Long Beach-Santa Ana, CA 38%
San Diego-Carlsbad-San Marcos, CA 37%
Riverside-San Bernardino-Ontario, CA 35%
New York-Northern New Jersey-Long Island, NY-NJ-PA 35%

A closer look at the data reveals that the share of working households with a severe housing cost burden increased significantly over the two years studied in 19 of the 50 largest metropolitan areas, yet decreased significantly only in the Riverside, Calif., area. Of these 19 metro areas, 13 are located in the South and two more are in California. Overall, the level of severe housing cost burden among working households displayed a high level of variation at the metropolitan level. Levels ranged from a high of 43 percent in the Miami area to a low of 15 percent in Pittsburgh.

Methodology

This report is based on Center for Housing Policy tabulations of American Community Survey (ACS) data collected by the U .S. Census Bureau in 2008, 2009, and 2010. Estimates in this report were generated by the Center using Public-Use Microdata Sample (PUMS) population and housing files made publicly available by the Census Bureau. Each file includes roughly 40 percent of the full ACS sample for its respective year, resulting in over 3 million records in each population file and over 1.2 million records in each housing file.The Center for Housing Policy analyzed these data to develop national, state, and metropolitan area estimates of working households with severe housing cost burdens.

Notes: For purposes of this report, "working households" are defined as those with a household income of no more than 120 percent of the area median income in which the household members worked an average of at least 20 hours per week for the preceding 12 months. "Severe housing cost burden" is defined as monthly housing costs (including utilities) exceeding 50 percent of household income.

Acknowledgements

The Center for Housing Policy gratefully acknowledges the support of the John D. and Catherine T. MacArthur Foundation for this work. Any opinions or conclusions expressed, however, are those of the authors alone.

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National Housing Conference: Center for Housing Policy

ANNUAL STUDY REPORTS A DECREASE IN HOUSING
AFFORDABILITY FOR AMERICA'S WORKING HOUSEHOLDS


Continued high unemployment rates, decreasing income
levels and rising rental costs are likely contributing factors.

Although home values have continued to fall over the past few years, housing affordability has significantly decreased for working owners and renters, according to an annual report released by the Center for Housing Policy, the research affiliate of the National Housing Conference. The report, titled Housing Landscape 2011, provides an in-depth look at housing affordability trends for working households between 2008 and 2009 focusing on the effects of employment, income and housing costs.

According to the report, nearly one in four working households had a severe housing cost burden in 2009, spending more than half of its income on housing costs. Nationwide, some 10.5 million working households experienced a severe housing cost burden in 2009 - an increase of nearly 600,000 households from the prior year. This increase occurred despite a drop of 1.1 million in the overall number of working households.

"These findings will be surprising to many who have followed the nationwide decline in home prices," said Jeffrey Lubell, Executive Director of the Center for Housing Policy. "Housing costs for existing homeowners have declined only slightly, while housing costs for working renters have actually gone up. Meanwhile, high unemployment and falling incomes have left low- and moderate-income families struggling to make ends meet."

"This report's findings serve as a reminder that falling home values have not solved the affordable housing crisis in America," said Maureen A. Friar, President and CEO of the National Housing Conference. "Funding of vital affordable housing programs is still needed even during these tough economic times to ensure stability for America's working families."
National Findings
The report details that housing affordability declined substantially for working renters across the country. Approximately one-fourth of working renters (24.5 percent) had a severe housing cost burden in 2009 -- a significant increase over the 22.1 percent with this problem in 2008. Housing affordability declined among homeowners as well. Some 21.2 percent of working homeowners had a severe housing cost burden in 2009, as compared with 20.1 percent in 2008.

While severe housing cost burdens affect working households across the income spectrum examined in the report (up to 120 percent of the local area median income), they are most prevalent among the households with the lowest incomes. Four out of five working households with extremely low incomes (below 30 percent of the local area median) had a severe housing cost burden in 2009. Roughly 71 percent of working households with a severe housing cost burden in 2009 earned 50 percent or less of the area median income (AMI).

The report identified several factors as contributing to the decline in housing affordability, including an increase in rents, a reduction in the number of hours worked per week, and falling incomes.

State and Local Findings
The report examines housing affordability trends for working households at the state level as well as for the 50 largest metropolitan areas. Between 2008 and 2009, the share of working households with a severe housing cost burden increased significantly in 25 states and decreased significantly in none. In addition, in five states, the share of severely cost-burdened working households both exceeded the national average and experienced a statistically significant increase between 2008 and 2009. These states were Arizona, California, Florida, New Jersey, and New York.

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 2009:

Miami-Fort Lauderdale-Pompano Beach, FL 42%
Los Angeles-Long Beach-Santa Ana, CA 37%
Orlando-Kissimmee, FL 35%
Riverside-San Bernardino-Ontario, CA 35%
San Diego-Carlsbad-San Marcos, CA 34%

A closer look at the data reveals that the share of working households with a severe housing cost burden increased significantly in 16 of the largest metropolitan areas, yet decreased significantly in none. Of these 16 metro areas, 14 are located in the Midwest and the South. Overall, the level of severe housing cost burden amongst working households displayed a high level of variation at the metropolitan level. Levels ranged from a high of 42 percent in Miami to a low of 15 percent in Pittsburgh and Louisville.

Methodology

A low- to moderate-income working household is defined as one in which (a) members combined to work at least 20 hours per week, on average, for the 12 months preceding the survey; and (b) total income was at or below 120 percent of its area median income for the survey year.

Report findings are based on American Community Survey Public-Use Microdata Sample files from 2008 and 2009. Population and household records in these files provide data on household income, hours worked per week, housing costs, and a geographic identifier that indicates metropolitan area of residence. The Center for Housing Policy analyzed these data to develop national, state, and metropolitan area estimates of working households with severe housing cost burdens.

For the full report click here.

About the Center for Housing Policy
The Center for Housing Policy, NHC's research affiliate, specializes in developing solutions through research. In partnership with NHC and its members, the Center works to broaden understanding of the nation's housing challenges and to examine the impact of policies and programs developed to address these needs.

About National Housing Conference
As the United Voice for Housing, the nonprofit National Housing Conference (NHC) has been dedicated to helping ensure safe, decent and affordable housing for all in America since 1931.