Housing Costs Take The Lead, Strain Houshold Budgets Most

Housing and transportation costs have risen faster than annual incomes since 2000, increasing the burden these costs have placed on already stretched household budgets, according to a recent report by the Center for Housing Policy (CHP) and the Center for Neighborhood Technology (CNT). By the end of 2010, costs of place—housing and transportation costs—have consumed an average of 48% of median household’s income.

For moderate-income households, the problem is worse. Defined as households earning between 50-100% of the median income of their metropolitan area, moderate-income households spend more than half of their earned income on transportation and housing costs. Spending approximately 59% of their incomes on cost of place, these households often have little income left over for expenses such as food, education, health care and savings.

In metro areas where the cost of living is matched by relatively high incomes, moderate-income households can better afford housing and transportation costs, whereas regions that have low incomes but high housing and transportation costs end up paying a greater percentage of earned income. 

The cost-burdens differ between homeowners and renters in metropolitan areas, with homeowners paying a greater percentage of income for housing and transportation. For the typical homeowner carrying a mortgage, an average of 72% of income is spent on housing and transportation. Owners who have paid off mortgages only pay 62% of income, whereas the typical moderate-income renter’s cost-burden is 55%. 

The CHP and CNT suggest probable approaches to enhance households’ affordability in major metropolitan areas, such as the preservation and maintenance of existing location-efficient housing to reduce transportation costs. Further improvements to transit services where housing prices are already affordable would also diminish reliance on autos, allowing households to preserve greater income percentages for basic essentials. 

With the implementation of these potential solutions, local and state governments can significantly reduce the burdensome costs for moderate-income households, allowing more security for incomes, and ultimately, families.

Written by Jason Oliva

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