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Homeownership Remains Unaffordable For Many Key Workers, Despite Low Interest Rates And Steep Drops in Home Prices

New Study Takes In-Depth Look at Housing Challenges of “Green Economy” Workers and Others, Comparing and Ranking Costs in More Than 200 U.S. Metro Areas with the Wages of Over 60 Occupations


Washington, DC (March 23, 2010) – Purchasing a home remains unaffordable for many key community workers despite historically low mortgage interest rates and steep drops in home prices, according to a new study released today by the Center for Housing Policy entitled Paycheck to Paycheck: Wages and the Cost of Housing in America. Specifically, the study compares and ranks the costs of buying or renting a home in more than 200 U.S. metropolitan areas with salaries for over 60 occupations. Overall, the income needed to purchase a median-priced home dropped in 93 percent of the homeownership markets studied between 2008 and 2009, yet many workers still do not earn enough to own a home. In addition, the typical rent for a two-bedroom home rose in 89 percent of the markets studied. The steady rise in rents and the decline in mortgage costs nationwide may, to some extent, reflect a continued shift in demand from homeownership to rental housing as families exit homeownership due to foreclosure and as renters wait for market stability before buying a home. As the findings indicate, this trend was particularly noteworthy in Florida.

The study offers a unique glimpse at housing affordability for workers in the emerging “green economy” who help make the nation’s homes and businesses more energy efficient and help to produce clean and sustainable energy, including electrical engineering technicians, environmental engineering technicians, HVAC (heating, ventilating, and air conditioning) mechanics, maintenance and repair workers, and insulation workers. In addition, the study examines affordability for key “traditional” community workers, including police officers, elementary school teachers, licensed practical nurses, retail salespeople and janitors.

“While the green economy holds substantial promise as a source of higher-paying jobs, there are still many housing markets in which green economy workers cannot afford the costs of buying or renting a home," said Center for Housing Policy Chair John K. McIlwain, senior resident fellow and the J. Ronald Terwilliger chair for housing at the Urban Land Institute. “We must develop the common sense, cost-effective policy solutions at the state and local levels that will help ensure long-term affordability for green economy workers and others. Otherwise, our workforce will face longer commutes and higher transportation costs, leading to increased traffic congestion and adverse environmental impacts."

A Closer Look: U.S. Housing Affordability Trends

Green Economy Workers
According to the study, certain green economy workers were better able to afford housing than workers in other lower-paying jobs, confirming the general benefits of restructuring the economy to create more green jobs. For example, electrical engineering technicians were able to purchase a median-priced home in 122 and environmental engineering technicians and HVAC mechanics in 118 of the 208 homeownership markets studied.

Electrical engineering technicians were also able to rent a two-bedroom apartment in 198, environmental engineering technicians in 192, HVAC mechanics in 195, maintenance and repair workers in 146, and insulation workers in 142 of the 210 rental markets studied.

However, the study findings also revealed many markets where green economy workers were unable to afford the costs of buying or renting a typical home, suggesting that a greener economy, by itself, would not completely solve workers’ housing problems and reaffirming the need for well-designed housing policies to meet families’ needs.

The study found that maintenance and repair workers could not afford to purchase a median-priced home in 159 and insulation workers in 163 of the 208 markets studied. Among the comparatively higher paying green economy workers, electrical engineering technicians could not afford the purchase a median-priced home in 86 and environmental engineering technicians and HVAC mechanics in 90 of the 208 homeownership markets studied.

Traditional Community Workers
Homeownership Affordability: Many workers in the traditional economy fared even worse than green economy workers. Even with lower interest rates and home prices, many workers are still unable to affordably buy a median-priced home in their communities. In addition to the continuing challenge of low salaries for many occupations, tighter credit markets and stricter lending practices make it more difficult for those who can now afford a home to actually qualify for one.

The homeownership affordability findings for traditional community workers reveal that police officers cannot afford to purchase the median-priced home in 86, elementary school teachers in 83, and licensed practical nurses in 146 of the 208 homeownership markets studied. Janitors cannot afford to purchase a home in 202, and retail salespeople in 207 of the markets studied.

Low interest rates and falling home prices have made homeownership newly affordable for police officers in 37, elementary school teachers in 33, and licensed practical nurses in 26 previously unaffordable metro areas.

The markets with highest median home prices are: San Francisco, CA; San Jose, CA; Honolulu, HI; Santa Ana, CA; and Santa Cruz, CA. And places with the steepest drops in income needed to purchase a median-priced home include: Atlantic, NJ, and Ocala, Fort Lauderdale, Port St. Lucie, and Cape Coral, FL.

Rental Affordability: The study found that in the vast majority of metropolitan markets, fair market rents have held steady or increased – occasionally surpassing monthly mortgage payments for a median-priced home. Specifically, retail salespeople continue to be priced out of renting a two-bedroom apartment in every market studied. Janitors fare almost the same, being able to afford a two-bedroom apartment in only one of the 210 rental markets studied. Licensed practical nurses are unable to rent a two-bedroom apartment in 55, police officers in 12, and elementary school teachers in 11 of the markets studied.

Rents have increased in 89 percent of the markets studied, with only 23 metro areas experiencing a rent decrease. Places with the highest increases in rents over the one-year period studied include: Knoxville, TN; Tucson, AZ; Charleston, SC; Bakersfield, CA; and Sarasota, FL.

Florida Findings
Rising rents and declining homeownership costs are particularly noteworthy in Florida. The income needed for homeownership dropped more than 20 percent in 12 Florida markets while typical two-bedroom rents across all of the Florida markets studied rose, on average, nearly six percent – twice the median rent increase in the study as a whole. At the same time, wages for many community workers remained flat or decreased in numerous Florida markets.

U.S. Metropolitan Area Rankings

Fact SheetMost to Least Expensive Homeownership Markets
Fact SheetMost to Least Expensive Rental Markets
Fact SheetChanges in the Qualifying Income Needed to Purchase a Home

Learn More About Housing Solutions

Today’s announcement is part of Housing Solutions Week 2010 – a series of events and announcements being hosted by the Center for Housing Policy and its affiliate, the National Housing Conference, focused on framing the nation’s housing challenges, while at the same time providing some of the solutions necessary in order to meet those challenges.

Acknowledgements

The Center for Housing Policy gratefully acknowledges the support of the Chicago Dwellings Association in funding Paycheck to Paycheck: Wages and the Cost of Housing in America.

About the Data

Wages
Wage information is as of November 2009 and was provided by Salary.com, a private provider of salary information, which maintains a database of salaries by geographic location.

Housing Costs
Home price data are from the fourth quarter of 2008 and 2009 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, existing home sale price data 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 down payment of 10 percent.

Typical rents in each metropolitan area are based on the Fair Market Rents for fiscal year 2010, and for comparison, fiscal year 2009, issued by the U.S. Department of Housing and Urban Development. These are the Fair Market Rents in effect in the fourth quarter of 2009 and 2008, respectively.

The Hourly Wage Needed to Afford (found in the Paycheck to Paycheck online tables) is the wage that must be earned so that rent does not exceed 30 percent of income, a standard measure of affordability.

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Contact: Michele Anapol
(202) 466-2121 x226
manapol@nhc.org