Photo (cc) by Tax Credits
We recently wrote that average rents have reached $1,100 in many metropolitan areas, and fewer apartments are going unoccupied.
Now the Center for Housing Policy has published research that says nearly one in four working households is spending more than half its income on housing. (That includes utilities.)
That’s bad: It leaves less than half your income for everything else you need to get by, never mind any kind of savings or paying off debt. We recommend spending no more than 30 percent of your income on housing, and less if you can help it.
In fact, as we’ve said before, most lenders cap maximum spending on a mortgage payment at 28 percent of your gross monthly income — and that includes taxes and insurance, things renters don’t necessarily have to worry about.
The center’s analysis used census data from 2008 to 2011. It shows that working renters saw a national average increase in housing costs of 6 percent for the period. Meanwhile, their incomes fell more than 3 percent.
The financial burden on renters increased each year of that period, while for homeowners there was no significant change between 2008 and 2011. In part, this may be because the housing crisis pushed financially unstable homeowners back onto the rental market, CHP experts say. That lowered vacancy and pushed rents higher.
A growing share of both renters and owners cannot afford their homes, CHP said. California, Florida, New Jersey, Hawaii and New York were among the states with the highest number of people overburdened by housing costs. In those states, at least 30 percent of working households spent more than half their income on housing.