Report: Housing expenses grow at faster pace than income

The housing woes of America’s families extend beyond higher mortgage payments to include large increases in a wide variety of other housing expenses, according to a report published Wednesday by the Center for Housing Policy.

Housing expenses grew at a pace that far outstripped growth in income. For the purposes of the study, housing expenses include rent or mortgage payments as well as the cost of utilities, property taxes, insurance and maintenance.

Among homeowners, housing expenses increased by 65 percent from 1996 to 2006, while incomes grew by about 36 percent.

Similarly, housing expense increases of 51 percent among renters were not offset by renters’ income growth, which lagged behind at 31 percent.

In general, the median income of renters is only slightly more than half the median income of homeowners, a ratio that did not improve over the 10-year period.

The study, conducted by Washington, D.C.-based Center for Housing Policy, the research arm of the National Housing Conference, reveals that mortgage payments are only one of several factors contributing to the challenge of rising housing expenses and that problem is adversely affecting virtually all segments of the housing market, from new and longtime homeowners to renters and households without a mortgage.

“Any family can tell you that once they make the rent payment, the bills don’t stop there,” Maya Brennan, researcher and co-author of the report, told the Review-Journal Wednesday. “These are not discretionary bills. You can’t turn down the heat or turn off the water. The full picture of housing cost has gone up tremendously, almost twice as fast as income over that period.”

Specifically, between 1996 and 2006, mortgage payments increased 46 percent, utilities 43 percent, property taxes 66 percent and property insurance 83 percent.

Housing expenses rose by an average of $5,314, or 64.9 percent, over the 10-year period, substantially more than other major expenses such as food at $1,412 (30.1 percent); transportation at $2,126 (33.3 percent); and health care at $996 (56.3 percent). Median incomes rose 35.8 percent over the same period.

The study further found that large increases since 2006 in the cost of heating oil, natural gas and gasoline have further stretched families’ budgets. Fuel oil prices increased 131 percent from $1.05 a gallon in 1996 to $2.43 in 2006 and jumped another 52 percent to $3.69 in 2008. Natural gas prices more than doubled from $3.69 to $13.75 per 1,000 cubic feet over the 10 years and are now up to $14.30.

In 2006, homeowners typically spent 26.2 percent of their income on housing, compared with 21.5 percent in 1996. Nearly one in six households spent more than half of their income on housing, far more than the 30 percent threshold considered as affordable.

“It’s really difficult and unfortunate for families to stretch their budgets to make it,” Brennan said. “It looks like it’s going to be worse in 2008. Sadly, it looks like things aren’t headed in a positive direction.”

Additionally, gasoline expenses have nearly tripled in the last six years from $1.38 a gallon in 2002 to nearly $4 a gallon in 2008, though prices have subsided in the past few weeks.

As many Americans continue to live far from mass transit, the soaring price of gasoline, combined with a heavy reliance on private vehicles, could mean even higher expenses in coming years, the housing report noted.

“It takes an eye for putting the whole picture together,” Brennan said. “How do we manage to bring that bundle of costs down for people? I think communities need to take a comprehensive approach, look at ideas that have worked elsewhere for increasing affordability and doing green building and transit-oriented development, putting homes that are decent and affordable close to train and bus lines and putting in new lines of transportation.”

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.