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Where Do People Spend the Most of Their Paycheck on Housing?

According to a new report, the share of households that spend more than half of their income on housing slightly declined last year – but the trend could be short-lived. View data for every state.

Houses in San Francisco, California, the state with the nation’s highest rate of working households that devote more than half of their income to housing.
David Kidd/Governing
When low-income households pay high rent, there’s not much left to spend on food, health care and other necessities each month. Steep housing costs pose a major burden in some areas, with expenses consuming more than half of what households take in.

The National Housing Conference (NHC) published a report Wednesday examining the nation’s housing affordability, finding that 18.1 million households in 2012 were “severely cost-burdened,” meaning more than half of their income went toward housing expenses.

The report offers a bit of positive news: After years of steady growth, the share of working households considered severely cost-burdened dipped slightly from 23.7 percent in 2011 to 22.1 percent in 2012. (The report considers “working households” to be those where residents work at least 20 hours a week and income does not exceed 120 percent of area median income.)

The small decline, however, could be short-lived. Wage growth for low-income earners helped ease housing affordability in 2012, but it’s unclear whether these gains will be sustained.

“Unless housing production increases substantially – particularly in the highest cost markets – rents are going to continue to rise and could outpace incomes again,” the report states.

Between 2009 and 2012, the share of severely cost-burdened working households fell in 30 states, with 13 reporting statistically significant declines. The following table shows data NHC compiled for the 10 states recording the largest drops over the three-year period:

State Working Households Spending More Than Half of Income on Housing 2012 Share of All Working Households 2009 Share of All Working Households Difference
Arkansas 62,303 15.00% 18.80% -3.8
Florida 755,477 29.80% 33.20% -3.4
Michigan 275,564 20.30% 23.50% -3.2
Idaho 40,677 17.50% 20.50% -3.0
Minnesota 129,439 14.30% 17.20% -2.9
Colorado 171,696 19.60% 22.40% -2.8
Rhode Island 35,127 22.50% 25.30% -2.7
Nevada 95,719 24.90% 27.60% -2.7
Arizona 202,404 22.80% 24.90% -2.1
New Hampshire 39,063 17.60% 19.60% -2.0
Source: Center for Housing Policy tabulations of American Community Survey PUMS files
Other states, though, saw housing-cost hikes continue to outpace household income growth. In New Mexico, 23.2 percent of working households used more than half of their income for rent, a 3 percent increase from 2009 – more than any other state.

As one would expect, housing costs tend to be least affordable in coastal states. In California, nearly a third of working households devote more than half of income to housing – the nation’s highest rate. Other states with higher shares include New Jersey (30.8 percent), Florida (29.8 percent) and Hawaii (29.5 percent).

The following map shows states’ housing affordability. States with the highest shares of severely-burdened working households are shaded darker.

Click a state to display its data. Zoom out to view Alaska and Hawaii.

Of course, metro-area housing markets drive much of these totals. Governing compared housing costs and household income data for cities in an analysis published in December. 

Some areas – particularly those reaping the rewards of oil production – benefit from expanded payrolls, but it’s these same cities where housing is often most expensive. Nearly a third of working households spend more than half of income on housing in regions enjoying the strongest job growth, according to the NHC report. This leads to low-wage workers getting priced out of areas, meaning they’ll need to commute longer distances and spend more on transportation.

In the current housing market, it's renters – which are on the rise – who are feeling the most pressure. Renter households are twice as likely to be cost-burdened as homeowners, according to the report. Census Bureau data further indicates that in more than three-quarters of all larger cities with populations exceeding 100,000, the majority of rental households spent more than 30 percent of income on rent.

Median monthly housing costs for rentals climbed 3.9 percent between 2009 and 2012, according to the report. Over the same period, homeowners' costs dropped 5.1 percent, mostly from lower prices and owners refinancing mortgages at reduced interest rates.

The report notes housing costs would be even steeper without federal rental assistance. Only a quarter of low-income rental households receive federal assistance because of limited funding, according to the Center on Budget and Policy Priorities.

For the housing affordability burden to lessen in high-cost areas, two things must happen: wages will need to climb and rental housing costs begin to decline or level off.

Mike Maciag is Data Editor for GOVERNING.
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