A third of America’s households are cost-burdened by housing costs, according to a new report by Harvard University’s Joint Center For Housing Studies. Cost-burdened is defined as spending above 30% of your income on housing.
Even as the economy has seen a steady improvement since the 2008 financial crash, the income of millions of Americans is failing to rise in line with house prices. The effect hasn’t been equal across the country, however.
The Joint Center For Housing Studies recently released a report entitled “The State of the Nation’s Housing 2018”, which was then reviewed by 24/7 Wall Street to identify the 21st least affordable cities. Here are just the worst performing three on that list.
The last five years have seen a 29.7% increase in San Diego house prices. This is great news for investors, but not for low income families. The median house price is almost exactly half a million dollars above the median income, which means that 43.2% of households are cost-burdened. This number increases to 71.3% when looking only at low income households.
Low income families have managed to find housing with the help of mortgage reductions and cutting costs elsewhere. It is recommended that renters and buyers don’t spend more than 30% of their income on a home. In San Diego, however, this isn’t possible. While only 24% of Americans were cost-burdened in 1960, the rate now is closer to 45% in the most expensive cities.
Although house prices in Miami are much lower at $263,000, so too is the median income, which drops from $70,000 in San Diego to just $50,000 in Miami. This is why it takes the number two spot on the least affordable cities list. The past five years have seen the gap between income and house prices increase twice as fast as they have nationwide.
The total cost-burden rate in Miami stands at 45.7%, while two thirds of low income earners are cost-burdened. With the added cost of bills and maintenance, Miami is fast becoming an impossible living option, even for those who work in the city. The Metro area, where many need to be for employment, has a cost burden rate of 61.2%.
Los Angeles is the land of opportunity for aspiring actors, musicians and tech entrepreneurs. However, finding suitable affordable accommodation is becoming increasingly difficult. This means that finding success in business or the arts is slowly becoming possible only for the elites. The average house price here is $631,000, despite median income standing at just $65,000. This leaves a cost-burden rate of 46.7% or near as makes no difference three quarters for low income households.
If you are looking for a new home in the US, then you may be best off avoiding San Diego, Miami and Los Angeles. The government needs to do more to limit house inflation and ensure that income rises in line with house prices. This will reduce the rate of cost-burden and give everyone equal opportunities.