Workers Make Hard Choices to Pay for Housing
Low- and moderate-income working families are coping with a growing shortage of affordably priced housing by moving further away from their jobs and spending more money on transportation; cutting back on food and health insurance; or piling up debt, according to a new study from the Center for Housing Policy, “Something’s Gotta Give: Working Families and the Cost of Housing.”
From 2001 to 2003, monthly rent on a typical modest two-bedroom apartment rose 10% to almost $800, and the price of a typical existing home rose at a similar rate to $176,000, the study says. At the same time, according to a report from the Economic Policy Institute, median family income actually declined 1% and one out of every four workers earned less than $8.70 an hour.
Tracking the working families in the nation who pay at least half of their income for housing, the Center for Housing Policy finds that over half of the households in this group are home owners; suburbanites outnumber city dwellers; and they include teachers, police officers, firefighters and service workers. Housing affordability problems are greatest in the Northeast and West, but they are growing the fastest in the South and Midwest.
“Housing costs, both rental and homeownership, are beyond comfortable reach for many working families,” the center’s study says. “Nationally, in 2003, in order to afford a two-bedroom apartment (using the not more than the 30% of income rule of thumb), a worker would have had to earn $15.21 per hour. But the national median wages of a retail sales workers and a janitor were $8.82 and $8.98, respectively. In some local markets the gap is much larger.”
A range of workers have seen housing prices advance more rapidly than their incomes from levels they cannot afford, the study says. Between 2001 and 2003, the national median salaries of licensed practical nurses were up 4% to $33,000; elementary school teachers made $43,000, up 3%; and police officers earned $45,000, up almost 7%.
And the types of jobs most likely not to be able to keep up with rising housing costs are among those that are growing most rapidly. “Retail workers, teachers, food preparation workers, cashiers and janitors are all on the U.S. Department of Labor’s list of 10 occupations with the largest projected job growth for 2002-2012,” the study says.
Earlier research by the center and the National Association of Counties also found that housing supply problems among workforce families are not being adequately addressed. In a survey of some of the nation’s fastest growing counties, 85% of county officials reported that most new housing in their jurisdictions was geared to middle- and upper-middle income households. And a study by Harvard University’s Joint Center for Housing Studies last year found that new construction of rental housing over the preceding 10 years was disproportionately concentrated in the top one-fifth of the rent distribution.
Among the center’s findings on how working families who are earning no more than 120% of the local median income are juggling their finances to be able to pay more than 50% of their paychecks on housing:
- Expenditures for other essentials such as food, clothing and healthcare are being reduced, but the biggest expenditure by far is for transportation. Families paying excessive housing costs are spending just 7.5% of their income on transportation, compared to 24% for households spending 30% or less of their total budget on housing. Annually, “the results show that, on average, working families paying half of their total expenditures on housing spend $1,189 less on food, $978 less on healthcare and insurance and $5,227 less on transportation among other items.”
- Overall, low- to moderate-income working families spend 77 cents less for transportation for every additional dollar spent on housing. “This finding reflects the difficult choice that many working families face between expensive housing close to employment and cheaper housing farther away.”
- “In addition to credit card debt, which exceeds $8,000 on average, families are taking on auto loans and other types of installment debt. The Federal Reserve estimates that one-in-four low-income families spend about 40% of take-home earnings on debt payments.”
- Renters were more likely to report encountering problems putting food on the table than home owners, at least partly as a result of high and rising rents. “A recent report out of Washington State makes a strong link between rents and food insecurity,” the study says. “Recently, state officials conducted a study to understand why high-tech Washington is considered the second-hungriest state in the nation, even though it does not have an especially high poverty rate. They found that one in every five Washington renters spent more than half their income on housing, leaving little left over for other basics, including food.”
The report observes that while 8.3% of the nation’s low- and moderate-income working families are paying more than half their income on housing, the extent of the problem is worse when related commuting expenses are taken into consideration. More than 44% of the working households are devoting at least half their incomes to housing and transportation costs combined.
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