High housing cost burdens in the United States

Editor’s note: The State of the Nation’s Housing, released annually by Harvard University’s Joint Center for Housing Studies, provides a periodic assessment of the housing outlook in the United States and summarizes important trends in the economics and demographics of housing. The center’s director of research, Christopher Herbert, shares findings about housing cost burdened households from the most recent report.

Our 2013 report documents growing evidence of solid recovery in the U.S. housing market, but also includes the distressing news that the number of Americans with severe housing cost burdens — meaning they spend more than half their income on housing — remains at unprecedented levels.

The latest increases in the incidence of severe housing cost burdens mark a decade-long rise. In 2011, the number of households with severe housing cost burdens reached a new record of 20.6 million. Overall, from 2001 to 2011, the total number of severely cost burdened households soared by 49 percent.

Widening income equality has been an important factor in the spread of housing cost burdens, with growing numbers of very low-income households (bringing home less than 50 percent of area median income) helping to push up the total count of households unable to afford housing. But while rising unemployment and underemployment exacerbated the problem, even working full time does not guarantee that households can afford to pay for housing.

From 2007 to 2011, the share of low-income households with full-time jobs that were severely cost burdened increased to 42.4 percent. During this period, the total number of working poor households rose by 1.1 million, while the number of such households with severe housing cost burdens was up by 800,000.

With housing taking up so much of their funds, low-income households have much less to spend on other necessities. According to the 2011 Consumer Expenditure Survey, families with children in the bottom expenditure quartile spend a total of about $1,400 per month. After paying more than half this amount for housing, the average severely burdened low-income family with children has about $565 left for savings and all other monthly expenses — half the amount unburdened households have.

Four years after the official end of the Great Recession, housing markets across the country finally have shown signs of true revival, marked most visibly by widespread increases in home prices and rebounding construction activity. But significant challenges remain.

Given the importance of decent and affordable housing — and the profoundly positive impact it can have on an individual’s overall well-being — there is compelling need for increased efforts to address the long-standing housing affordability problems facing the United States.