A report released by the Center for Housing Policy on October 8 shows that many components of the typical household budget increased significantly faster than incomes between 1996 and 2006. During that time, housing costs increased as a percentage of the household budget relative to food, transportation, and even healthcare.
Over this ten-year period, housing costs for owners grew by 66%, while incomes for owner-occupied households increased by only 36%. All of the major components of housing costs, including mortgage payments (+46%), utilities (+43%), property taxes (+66%), and insurance (+83%), grew faster than incomes. During the same ten years, rents increased by 51%, while renter household incomes grew by only 31%.
Household budget data used in the report are from the 2006 Consumer Expenditure Survey, and the authors clearly point out that the costs of gasoline, fuel oil, and natural gas have increased significantly in the intervening years. Additionally, 13% of homebuyers in 2006 chose option ARM mortgages, and for many of these homeowners interest rate resets have translated into higher mortgage payments. In a slowing economy, these costs likely continue to rise faster than incomes, further straining household budgets.
To ameliorate rising energy costs, the authors advocate for policies that make new and existing residences more energy efficient and that promote the production of transit-oriented affordable housing. Investment in public transportation could also lessen the impact of rising gasoline costs on the household budget.
Stretched Thin: The Impact of Rising Housing Expenses on America’s Owners and Renters is available at www.nhc.org/pdf/pub_stretchedthin_2008.pdf.