Thirty Percent: Good Or Bad?
Thirty percent: It’s a terrible score on a school exam, but a rather nice figure for the relative humidity outside in this balmy fall weather. It’s also the amount of household income devoted to housing costs which the federal government uses as the“affordability threshold.” In other words, anyone devoting 30 % or more of their income to housing is considered to be living in “unaffordable housing.” This figure applies not only to those who own their homes but also to those who rent.
Recent reports would indicate that the number of both owners and renters living in unaffordable housing has increased. Consider this report: “The share of renters paying 30% or more of their household income on housing costs — the government threshold to determine if housing is unaffordable — rose to 53% last year from 51.5% in 2009 and about 50% in 2008, according to 2010 Census data released today.
While median rents remained stable last year at $855 a month, median national household incomes, adjusted for inflation, fell 2.2% — putting the squeeze on renter budgets. Last year, 38% of homeowners with a mortgage paid 30% or more for housing, up from 37.6% in 2009.
Yet, the fact that percentage rose at all shows that many homeowners haven’t been able to refinance mortgages, despite near record low interest rates. The US Census Bureau’s definition of housing costs includes mortgage payments, insurance, taxes and utilities. (Source: USA Today)
Living in a home remains the ultimate American Dream. For all of our country’s history the dream of land and homeownership has been an important motivating force for individuals and families. That desire drove the early pioneers from east coast to west coast and south; drove homesteading, especially in the west; and today continues to motivate individuals and families who want a home of their own. But there are obstacles to the dream.
In a perfect world, everyone who earns a salary should be able to buy a home of his or her own. However, the impact of the economic recession has clearly taken its toll on the ability of many people to purchase a home of their own. The rental market is very hot, as would be expected in times such as these with a slow residential real estate market, but there too we find obstacles for many individuals.
Mortgage lenders generally are not lending money today to many creditworthy individuals, but interest rates are rock bottom right now. Also, various municipal, state and federal government programs have been designed to expand homeownership. Some help is still there for home purchase – as long as you can make the numbers work.
Clearly it’s a challenge for everyone. CIN’s editors recognize the importance of homeownership, and we maintain a special section on affordable housing designed to provide information to prospective homebuyers, their counselors and advisors, lenders, developers, and others focused on the critical issues surrounding affordable housing.
- Rising rents lessen the affordability of housing (usatoday.com)
- You: Private rents unaffordable for families in most English boroughs (guardian.co.uk)
- Truth and Nonsense About Mortgage Lending, the Housing Collapse and Homeownership (scoppcanton.wordpress.com)
- Census: Housing bust worst since Great Depression (seattletimes.nwsource.com)
- National Survey of Homeowners and Renters Reports Increased Interest in Homebuying (prweb.com)