AMONG NEW HIRES, INCOMES THAT COVER HOUSING COSTS REMAIN ELUSIVE
Latest data show workers in the job sector with the most new hires are often priced out of housing
WASHINGTON, July 21, 2011—In the midst of a slow recovery from a prolonged recession, home prices have dropped and some employers are slowly starting to hire. Yet workers in many newly filled jobs still may not be able to afford housing at the wages currently being offered. The latest edition of the Paycheck to Paycheck database from the Center for Housing Policy (the Center) reveals the gap between wages and the costs of housing, both rental and owned, in more than 200 U.S. metro areas for workers in 72 occupations.
“The types of jobs currently being offered often don’t pay enough to afford housing and still have money left over for food, healthcare, and other household expenses,” said Center researcher and report author Maya Brennan.
National Housing Conference President Maureen Friar added, “Paycheck to Paycheck shows that job creation is only part of the answer for improving households’ economic prospects. Policies are also needed to ensure that housing is affordable for America’s working families.”
An accompanying report, Paycheck to Paycheck: Is Housing Affordable for Americans Getting Back to Work?, explores trends in housing affordability for workers in the five most common jobs in the industry sector doing the most hiring: accountants, groundskeepers, janitors, office clerks and security guards. Of these professions, the Paycheck to Paycheck data finds that only one—accountants—offers wages high enough to afford to rent or pay the mortgage on a home at typical prices nationwide. Not a single metro area studied in Paycheck to Paycheck offered a fair-market rent on a two-bedroom apartment affordable on a janitor’s salary, and in only 11 out of 209 markets could a janitor afford the mortgage on a median-priced home. In the most expensive markets covered, even relatively high-earning accountants could not afford the typical rent on a two-bedroom apartment.
See the data for 209 U.S. metro areas
Key Findings
- Of the five most common jobs in the industry sector (the Professional and Business Services supersector) doing the most hiring—accountants, groundskeepers, janitors, office clerks and security guards—only accountants earn enough on average to afford rent or mortgage payments at typical prices nationwide. However, even an accountant’s salary will not cover rent on a typical two-bedroom apartment or the mortgage payment on a median home in the most expensive housing markets.
- While many newly hired workers cannot afford their housing costs, low interest rates and drops in home prices in many markets mean that workers are somewhat more able to afford to buy a median-priced home than they were a year ago. However, home price data alone fail to account for additional costs of homeownership, such as fluctuating utility costs and major repair bills.
- Over the past year, the income needed to buy a median-priced home dropped by at least three percent in more than half of the metro areas studied, due to a combination of low home prices and falling mortgage interest rates. Credit constraints, difficulty amassing down payments, market uncertainty and other concerns may keep low- and moderate-income workers from buying homes in otherwise affordable housing markets.
- The pattern for renters is less clear since fair-market rents generally increased moderately, but wages have not followed a consistent pattern across the jobs studied.
Homeownership
Between 2010 and 2011, the income needed to buy a median-priced home dropped by at least three percent in more than half of the metro areas studied, due to a combination of low home prices and falling mortgage interest rates. In 49 metro areas studied, home prices have fallen so low that the fair market rent for a two-bedroom unit has become higher than the monthly mortgage payment for a median-priced home. This pattern is particularly evident in regions hit hard by foreclosures.
This trend does not mean that owning a home is less expensive than renting in these markets. Costs of ownership that are not covered in the mortgage payment include maintenance, repairs, and utilities – all of which can be substantial. Home purchases may also not be attainable for low- and moderate-income workers due to credit constraints and difficulty saving thousands of dollars for a down payment.
Rental Housing
The picture of rental housing affordability is less clear, with no dominant trends other than a moderate increase in fair-market rents over the past year. Among the markets studied, rent for a two-bedroom apartment rose by a median of 1.1 percent, and very few areas had rents either increase or decrease by more than five percent.
With moderate rent increases, housing affordability changes on the rental side tend to reflect changes in income rather than in housing costs. For jobs that saw salary increases over the past year, such as retail salespeople and nurses, rents in a few metro areas became newly affordable. For many workers, though, income growth has not consistently kept pace with rents. When workers’ incomes decreased, so did rental affordability.
U.S. Metropolitan Area Rankings
Fact Sheet – Most to Least Expensive Homeownership Markets
Fact Sheet – Most to Least Expensive Rental Markets
Fact Sheet – Changes in the Qualifying Income Needed to Purchase a Home
Acknowledgements
The Center for Housing Policy gratefully acknowledges the support of the John D. and Catherine T. MacArthur Foundation in funding Paycheck to Paycheck: Wages and the Cost of Housing in America. Any opinions or conclusions expressed, however, are those of the author alone.
Methodology
Wages and Occupations
Wage information is as of February 2011 and was provided by Kenexa’s Salary.com, a private provider of salary information, which maintains a database of salaries by geographic location. Wages are based on full-time employment in intermediate-level positions.
According to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, the Professional and Business Services supersector hired the most employees each month during the first quarter of 2011 and continued to have high numbers of job openings in April 2011. Within this sector, the largest job categories that do not require a professional degree are janitors, security guards, office clerks, groundskeeping/landscaping workers, and accountants/auditors.
Homeownership Affordability
Home price data are from the first quarter of 2010 and 2011 and include new and existing homes. Data are from the National Association of Home Builders (NAHB). In select cases where the data from NAHB were not available, home price data on existing homes from the National Association of Realtors are provided. Following conventional mortgage underwriting guidelines, the study assumes that not more than 28 percent of household income should be used to pay the mortgage, property taxes and insurance. The study further assumes a downpayment of 10 percent, an interest rate of 5.09 percent (the effective rate for February 2011 according to the Federal Housing Finance Agency), and the use of a 30-year fixed-rate mortgage.
Rental Affordability
Typical rents in each metropolitan area are based on the Fair Market Rents for fiscal year 2011, and for comparison, fiscal year 2010, issued by the U.S. Department of Housing and Urban Development. These are the Fair Market Rents in effect in the first quarter of 2011 and 2010, respectively.
The Income Needed to Afford (found in the Paycheck to Paycheck online tables) is the annual income that must be earned so that rent does not exceed 30 percent of income, a standard measure of affordability.
About the Center for Housing Policy
The Center for Housing Policy is the research affiliate of the National Housing Conference (NHC) and specializes in developing solutions through research. In partnership with NHC and its members, the Center works to broaden understanding of the nation’s housing challenges and to examine the impact of policies and programs developed to address these needs.
About National Housing Conference
As the United Voice for Housing, the nonprofit National Housing Conference (NHC) has been dedicated to helping ensure safe, decent and affordable housing for all in America since 1931.
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