Growing number of working households put 50% of their income into housing

Despite a variety of programs designed to reduce the cost burden on homeowners in the wake of the financial crisis, a new study from the Center for Housing Policy confirms that many working households are paying half or more of their income into housing costs. CivSource spoke with Laura Williams, research associate with the Center for Housing Policy and author of the report about the challenges faced by working families.

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. According to Census data, nearly one in four working households in the U.S. spends more than half of total income on housing – many of those households are renters.

“More people are renting for a variety of reasons. They need to be more mobile, they’ve been forced out of their homes, or they may just prefer to rent. The increased demand has made it possible for landlords to charge more,” Williams says.

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.

Even for those that own homes costs remain high. “Many homeowners that still have their homes purchased them at the high point in the market and few of them could take advantage of cost-lowering incentives. So their overall cost to stay in that home is higher,” Willimas notes.

The rough situation for homeowners and renters isn’t tied to a specific area of the country either. 24 states saw increases in the cost burden for homeowners and renters according to the study. California, Florida, New Jersey, Hawaii and Nevada all had the highest increases over 29% in all cases.

“Many areas that perhaps had less of a housing shock, still faced other economic hardships which decreases the supply of affordable housing,” Williams explains. “Communities really haven’t focused much on this demographic because they aren’t typically on benefits programs like food stamps. So from one standpoint they’re considered self-sufficient, but they are struggling.”

“The rule of thumb has been no more than 30% of income should go to housing, and that’s what we base the assistance formulas on. But that’s not really a reality for a lot of people. No one wants to spend half of their income on housing, but people in this bracket typically make too much money for outside help,” Williams said.

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.

“Overall, I think this is something policy makers are going to have to look at. It’s not a tenable situation over the long term. There are things that can be done, improvements to zoning, for example, but you have to look at the housing supply and real affordability,” Williams said.

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. The full report is available here.