Housing costs cripple more working households


(MoneyWatch) When you're paying more than 50 percent of your income on housing, there's not much room for anything else.

That burden concerned two housing experts from the Center for Housing Policy, who recently released a report indicating that in the recent past, nearly 25 percent of working Americans were struggling under heavy housing burdens. The culprit: dropping income levels.

According to the report, which used the most recently available data from the Census Bureau American Community Survey, the share of working households with a severe housing cost burden increased significantly between 2008 and 2011, rising from 21.8 percent to 23.6 percent.

The picture is most bleak for working renters, who saw both their incomes drop and their housing costs rise. Rental costs climbed 6 percent from 2008 to 2011, while income fell 3.2 percent.

And the problem is only getting worse. The percentage of renters paying more than 50 percent of their incomes on housing has gone up by 4 percent, from 22.8 percent to 26.4 percent. The foreclosure crisis, plummeting home values and stricter lending practices simultaneously pushed former homeowners into rental properties and kept more renters from moving on to homeownership, increasing demand for rental properties and driving up prices.

Homeowners, in a bit of a surprise twist, have fared slightly better. Homeowners saw housing costs drop 3.2 percent, but income dropped even further, falling 4.2 percent. About 21 percent of working homeowners struggle with a severe housing cost burden.

"The falling housing costs really prevented the burden from growing in terms of a problem, but it didn't improve the burden either," said Janet Viveiros, co-author of the report along with Maya Brennan.

Without any growth in income, these levels of burdensome housing costs are not sustainable, according to the authors.

"We really need to be thinking about long-term solutions on the ownership side and making sure that renters have access to enough affordable communities," Viveiros said.

This isn't an isolated problem either: Housing affordability directly affects the economic recovery.

"People have a finite paycheck and where people put their money is limited," Viveiros said. "When you're spending most of your paycheck on housing, you're forced to cut back in other areas."

That means less money spent on food, healthcare and even the more frivolous retail items that make our economic world go round.

The lack of job and income growth sticks out as the biggest weight on the economy. Without income growth spurred by quality jobs, the slow growth that has returned to our economy will likely stall.

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    Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.