|
Household Budgets Stretched Thin by Housing Costs, Study Finds
The nation’s current foreclosure crisis has focused criticism on the widespread use of subprime and exotic mortgages at the height of the housing boom, but mortgage payments are only one of several factors that are making the cost of housing tough for both home owners and renters alike, according to a new report from the Center for Housing Policy.
Examining trends between 1996 and 2006, the study, “Stretched Thin: The Impact of Rising Expenses on America’s Owners and Renters,” finds that all the major categories of home owner expenses increased faster than incomes, some substantially. These housing cost increases could compromise the ability of both home owners and renters to stay in their homes, the study warns.
Over the 10-year period covered by the study, a growing share of household income was devoted to housing.
In 2006, households typically spent 26.2% of their income to own a home, up from 21.5% in 1996, while they paid 29.4% of income for rent, up from 25.6% 10 years earlier.
However, the study says that these averages mask wide variations.
“Nearly one in six households — nine million home owners, nine million renters — spent more than half their income on housing in 2006 — a share of income far in excess of the 30% threshold generally deemed ‘affordable,’” the study says.
“Most tellingly, the increase in housing expenses between 1996 and 2006 far exceeded increases in other essentials. Housing expenses increased by an average of $5,314 (64.9%) during this period, substantially more than food ($1,4213 or 30%) and transportation ($2,126 or 33.3%) and even outpacing health care ($996 or 56.3%).”
The report draws on the U.S. Department of Labor's Consumer Expenditure Survey and other sources to put housing expenses in the context of the typical household budget.
Incomes for all households rose 35.8% over the 10-year period, and home owners saw a 36.3% increase. By comparison, mortgage payments climbed 46%, utilities 43%, property taxes 66% and property insurance mortgage payments 83%.
Rental costs also increased faster than incomes. Rents increased by 51% between 1996 and 2006, while renter incomes grew by only 31.4%. Moreover, the costs of owning and maintaining rental properties were also affected by the cost trends examined in the report, and will likely be passed along to tenants through rent increases.
Looking at more recent data, the report identifies factors that are likely to exert further upward pressure on housing costs and their implications for national housing policies:
- Rising Utility Costs. In the face of “galloping” fuel oil and natural gas costs, a systematic approach is needed to make existing owned and rental residential buildings more energy-efficient. The report describes the current patchwork of federal, state and local programs to assist residents with utility bills and modest energy improvements as “largely stopgap measures.”
- Rising Transportation Costs. The households who bought on the fringes of metropolitan areas where homes were more affordable have now been saddled with huge transportation costs following rising gas prices. “To reduce the combined burdens of housing and transportation costs, incentives are needed for the production of more affordable housing near transit jobs and other amenities. Increased investment in public transit, including buses, also would help lighten the load.”
- Declining Home Prices, But Rising Rents. Although housing prices have receded from their mid-decade peaks and are somewhat more affordable, homeownership remains out of reach for millions of households around the country. At the same time, mortgage costs have not come down as fast because credit has tightened and non-traditional mortgage products are harder to come by.
“Similarly, because assessed home values in many areas never reached the levels of peak home prices, property taxes have not necessarily declined as fast as home prices. At the same time, the rental market appears to have tightened, leading to further increase in rents — all while the economy as a whole is struggling.”
“By documenting the substantial increases in a wide variety of housing expenses, this study shows that the nation’s housing concerns extend beyond higher mortgage payments,” said Center for Housing Policy Chairman John McIlwain, a senior resident at the Urban Land Institute and the ULI/J. Ronald Terwilliger chair for housing.
“To get the American economy back on its feet, we will need to look comprehensively at helping Americans afford the full ‘costs of place,’ which include the costs of shelter, utilities and transportation,” he said.
The Center for Housing Policy is the research affiliate of the National Housing Conference.
 Attend the NAHB Construction Forecast Conference
Don't miss NAHB's 2008 Fall Construction Forecast Conference and Webcast for the latest economic news about the housing industry.
Join NAHB on Oct. 22 in Washington, D.C., where the country’s leading economists and finance experts will provide insight into the uncertainties of the housing market.
Onsite registration is available the day of the conference.
To register for the Webcast, and to see the full conference agenda, visit www.nahb.org/cfc.
 Want to Know the Housing Forecast for the Top 100 Metros?
Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview).
Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables.
To learn more, visit www.HousingEconomics.com.
 Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown
What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn.
To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.
|
