by Janet Viveiros, Center for Housing Policy
I have spent the last few weeks staring at the spreadsheets that will ultimately become Paycheck to Paycheck 2013 (which will be released later this month), I have been thinking about how housing affordability is faring in the housing market recovery. Paycheck to Paycheck is an interactive online database that evaluates the affordability of renting or buying typical homes for workers in over 70 occupations.
Much like in March, I have noticed that the headlines on housing seem dominated by discussion of a housing market rebound. However, the good news on house prices does not quite align with the numbers that represent housing affordability in all the spreadsheets I have been looking at for Paycheck to Paycheck.
As hopeful as it might be to read stories about a housing market recovery, it is important to look beyond home prices and think more broadly about housing costs. Housing affordability is not just a function of home prices, mortgage rates, or rents, but also income. Can households at all income levels afford to buy or rent a home? Do mortgage payments or rent comprise more than 30 percent (widely accepted standard of housing affordability) of a household’s income?
Based on median wages for over 70 occupations and median home prices and fair market rents in over 200 metros for Paycheck to Paycheck 2013, we found that workers often cannot afford to buy a modest home or rent a typical unit in their area. In the 15 metropolitan areas with the most expensive housing markets, median wage workers in less than 20 percent of the occupations we examined can affordably buy a median-priced home. Even, in places where home prices are relatively affordable, it is often difficult for households to save up for a downpayment or access credit.
Households even have challenges in affording two-bedroom apartments in many places. Typical rent for a two-bedroom is unaffordable for workers in almost 75 percent of the occupations in the 20 metropolitan areas with the most expensive rental markets.
Wages have stagnated for American workers in the past few years despite the economy beginning to recover. This squeezes workers and makes saving for down payments and managing rising housing costs very difficult. Many households have to cut back on essentials such as healthcare, food, and education or move far from job centers and endure long and costly commutes.
Rising home prices in many housing markets around the country will not resolve housing affordability obstacles on their own. Communities must proactively work to meet the housing needs of their residents. Communities require solutions tailored to local conditions and there are many tools available to help policy makers and stakeholders improve housing affordability, such as HousingPolicy.org, and opportunities to learn about the successes of other communities at events like NHC’s upcoming Solutions Conference in Atlanta.
While the progress made in slowing foreclosures and stabilizing neighborhoods is important progress, there is still more hard work needed to ensure that every household can afford a safe and decent home.
To learn more about housing affordability challenges facing workers, check back at the Open House Blog in mid-August to read about Paycheck to Paycheck 2013 when it is released.