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A Record Number of Americans Are Spending More on Housing Than They Can Afford
By Pete Grieve MONEY RESEARCH COLLECTIVE
An “unprecedented affordability crisis” hit the housing market after the pandemic, Harvard researchers say.
Record numbers of homeowners and renters are spending more than they can afford on housing, according to Harvard researchers.
In 2022, half of U.S. renters were putting at least 30% of their income toward housing costs, which include utilities. A record high 22.4 million met this definition of “cost-burdened,” an increase of 2 million in three years.
The report from the Harvard Joint Center for Housing Studies also found that 23% of homeowner households “are now stretched worryingly thin.”
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View RatesThe number of homeowners who were spending more than 30% of their income on housing and utilities rose to an all-time high of 19.7 million in 2022, an increase of 3 million from 2019. Among that group, 9 million homeowners were spending more than 50% of their income on housing costs.
The research illuminates just how much the pandemic housing boom has impacted household budgets.
The housing market has only grown more challenging over the last two years. According to a separate Redfin report Thursday, the median home sales price increased to a record high of $396,000 for the four weeks ending June 16, up more than $50,000 in three years.
Homeowners and renters have both been affected by the massive jump in housing costs, and rent prices are 26% higher compared to early 2020, according to the Harvard report.
“Rents have been rising faster than incomes for decades,” Alexander Hermann, a senior research associate, said in a release. “However, the pandemic-era rent surge produced an unprecedented affordability crisis that continues.”
Housing costs are near the all-time high
High home prices and high interest rates are major barriers to homeownership. In June, mortgage rates dipped back slightly below 7%, but the typical monthly mortgage payment ($2,781) is still only $60 off the all-time high, according to Redfin. That’s an increase from about $1,700 three years ago.
Home prices haven’t stopped rising despite high rates because there’s a shortage of inventory on the market. Many homeowners are locked into low mortgage rates and don’t want to sell.
As homebuying costs have gone up, millions of renters have been priced out out of becoming owners. Low-income and minority Americans are struggling to an even greater degree to afford homes, the Harvard report found.
“Whether it’s the high down payment or the monthly mortgage payments, the costs of buying a home have left homeownership out of reach to all but the most advantaged households,” Daniel McCue, a senior research associate, said in the report.
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Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.