Cities Where Wages Haven't Kept Pace with Rising Housing Costs

With wages stagnant and housing costs rising, many Americans struggle to pay their rent and mortgage. View data showing each city's housing affordability burden.
by | December 19, 2013 AT 6:00 PM
Areas with sluggish economies in parts of California, Florida (such as Miami above) and Michigan appear to have the most severe housing affordability burdens. FlickrCC/lubright

In Miami Gardens and Hialeah, Fla., most renters pay more than 35 percent of their incomes on housing and utility costs. The two Miami suburbs typify a troubling trend that’s emerged in a large number of U.S. cities where enough good-paying jobs aren’t available to adequately pay for costly housing.

Many Americans – particularly renters – saw housing costs steadily climb in recent years. At the same time, wages remained relatively flat for most segments of the workforce, meaning families spend a greater share of their incomes on housing instead of food, health and other necessities.

Nationally, for slightly more than half of rental households, monthly gross rent costs last year accounted for 30 percent or more of household income -- the general rule-of-thumb maximum that families should not exceed. For homeowners with a mortgage, about a third of households reported housing-related costs surpassing the 30-percent standard, according to Census estimates.

“It plays out differently across the United States, but overall, these burdens are increasing,” said Erika Poethig, the Urban Institute’s director of urban policy initiatives.

While the problem is growing nationally, it's most apparent in select urban areas.

A review of Census Bureau data for 2010-2012 indicates that in more than three-quarters of all larger cities with populations exceeding 100,000, the majority of rental households exceed the 30-percent standard. Setting a higher threshold, gross rent costs still account for more than 35 percent of the majority of rental household incomes in 78 cities.

A study published last week by the Harvard Joint Center for Housing Studies takes a deeper look as some of the underlying issues behind rental housing affordability. Much of the problem stems from supply not keeping pace with demand. Some families, particularly those whose homes were foreclosed, swapped homeownership for rentals. Millennials also rent at high rates.

This increased demand led to higher rental prices as vacancy rates fell. The Harvard report notes that, between 2000 and 2012, real median rent increased 6 percent while renters’ real median incomes plummeted 13 percent.

The Census Bureau's most recent estimates indicate the share of renters spending more than 30 percent of income on housing dipped a bit last year, but it’s above pre-recession levels.

Areas with sluggish economies in parts of California, Florida and Michigan appear to have the most severe housing affordability burdens.

"People who are making minimum wage are going to really struggle to find a place they can afford to rent," said Janet Viveiros, a Center for Housing Policy (CHP) researcher.

In other markets, workers may earn steady paychecks, but soaring costs put affordable housing out of reach.

This is perhaps most evident in San Francisco and other California cities, where, as Viveiros pointed out, police officers, paramedics and others who could afford adequate housing elsewhere struggle to do so in high-cost areas.

Ideally, Poethig said, households should aim to spend between 20 and 30 percent of income on housing-related costs. While they want to avoid spending too much, families also don’t want to shortchange themselves. Those locating in areas with poor schools and few viable transportation options put themselves at a disadvantage, Poethig said.

Another useful metric the Census Bureau estimates is the median gross rent as a percentage of household income. By this measure, Flint, Mich., recorded a median value of 49.3 percent of income – highest in the nation.

The following table shows, for cities with at least 100,000 residents, median gross rents as a percentage of household income and the share of rental households where rent and utility costs exceed the 30-percent of income standard:

Source: U.S. Census Bureau: 2010-2012 American Communities Survey Estimates

While the numbers aren't quite as bleak for homeowners with mortgages, many areas similarly recorded estimates that are cause for concern.

So what can policymakers do to bring housing costs more in line with incomes?

Every market is different, so localities are employing a range of policy measures. Zoning ordinances, for example, may include requirements or incentives encouraging developers to build affordable housing units. To bring down energy costs, some localities push more aggressive energy-efficient standards to lower costs of operating rental housing.

One major point of emphasis for Chicago, New York and other large cities has focused on preserving existing rental housing.

"The affordability challenges are probably only going to worsen with time," CHP's Viveiros said.


Housing Costs, Income Data

Select a city below to display detailed rent and home ownership costs for cities with 2012 estimated populations exceeding 100,000. Monthly gross rent costs include contract rent and utility expenses. Homeowner costs take into account mortgages, home equity loans, real estate taxes, homeowners insurance, condo fees, mobile home costs and utilities.

Source: U.S. Census Bureau: 2010-2012 American Communities Survey