Since 2008, Only High-Income People Have Seen Their Housing Costs Drop
The 1 percent may be hoarding America’s wealth, but the 25 percent are hoarding its housing opportunity.
That’s according to an Apartment List analysis of changing incomes and housing rates in the U.S. It found that the current state of the housing market both exacerbates and mirrors the economic inequality widening at the national and local level. Incomes are growing fastest for the country’s wealthiest, but at least for the top quarter of earners, their housing costs are also falling fastest. Meanwhile, it’s Americans in the bottom 10 percent of incomes whose rents and mortgages are getting more expensive.
In other words, those with more to spend on housing are having to spend a lot less than they were a decade ago, and vice versa. Almost everywhere. “In the top 100 largest metros in the U.S.—in each one of them—housing costs have grown more for the bottom half in income distribution than the top half,” said Igor Popov, Apartment List’s chief economist.
It’s no wonder that, as the National Low Income Housing Coalition found this year, “no state has an adequate supply of homes affordable and available to its lowest-income renters.”
Zoom out to track the difference between today and 1980, and the picture changes a little. Not for renters and homeowners in the bottom 20 percent of the income distribution, who are still paying upwards of half of their monthly earnings on housing—far over the 30 percent threshold that’s considered rent-burdened. (A separate recent CityLab analysis of housing burdens found that more than ten percent spend half their earnings on housing.) When you climb the income ladder, though, that proportion dips. Those on the top of the income bracket now spend less of their incomes on housing each month than they did in 1980.
The gap has a lot to do with who’s renting and who’s owning, says Popov. People lowest on the income distribution are more likely to sign short-term leases than mortgages. And, while rents have risen over the past decade, housing costs have fallen.
“Almost all of those renters are exposed to the market conditions and a growing economy and growing rents,” Popov said. “Whereas a lot of [home-owning] folks—maybe not the ultra-rich—they’re moving less and less, and over time slowly refinancing to pay less than they used to.”
That compounds the disparity between renters’ and homeowners’ disposable income. The median income of renters has grown faster than the median income of homeowners, but, the report says: “Today, renters at all income levels are spending a greater share of their income on rent than they did in 1980.” They found it was especially acute for those at the lower end of the income distribution. Homeowners, however, “are paying a smaller fraction of their monthly paychecks for housing than they used to.”
This is a problem that coincides with the general growth of inequity hitting people in cities across the United States: Since 2008, almost all of the United States’s top 50 metros have experienced widening inequality, with the split between the wealthy and low-income in New Orleans growing fastest. And the housing affordability gap has had a similarly broad reach.
“In each of the top 100 metros, households earning less than the median income have seen their housing costs rise more quickly (or fall less) than those in the top half of the income distribution,” the report reads.
Presidential candidates and city policy-makers alike have taken note of renters’ growing dissatisfaction, rolling out new rental assistance proposals and targeting investments in rental units. But the problem is more fundamental, says Popov, and it needs a holistic solution.
“Housing policy is inequality policy,” said Popov. “When you accelerate what happens with the potential savings that the folks at the top are getting versus the folks at the bottom, they can use that to invest, and they can use that to take more risks. And that just fuels the problem.”