For most Americans, the cost of housing is their largest regular expense. Rent or mortgage payments, utilities, insurance, maintenance — it all adds up. A report this month from the website ApartmentList.com found, in fact, that it adds up especially for those who make less.
The company, as the name implies, lists apartments across the country, primarily in bigger cities. But its report, linking housing costs and income inequality, went impressively deep. It compared rising rents from 2008 to 2017 with the cost of home ownership over that span. Then it put both against the growing disparity in wealth over the past several decades.
While wealthier Americans might choose to live in apartments, typically they opt to own their homes. The reason, beyond added privacy and being able to control the space, is simple: It’s better to own than rent, because for a similar monthly payment, you eventually have a tangible asset that, because property values rarely decline, is likely worth more than you paid for it. And at the end of the 15, 20 or 30 years of mortgage payments, you can stop paying. If you rent, you’re still paying when that period is over.
ApartmentList found particular disparity in relative housing costs between lower and higher income brackets. What stood out was that while housing costs overall have risen across the nation, income among the top 25 percent has skyrocketed, and among the lowest 25 percent, has barely budged. When you add that the cost of owning a home has actually dropped in the past decade, while rents have increased, that’s created a widening gap in the percentage of income that’s going toward housing.
The numbers show, for example, that while income for those in the bottom 5 percent of earners actually dropped about 8 percent between 2008 and 2017, housing costs for that group rose 17 percent. Conversely, the top 5 percent of earners saw their incomes rise by about 25 percent, while their housing costs dropped 2 percent. Or look at it this way: That bottom 5 percent, by 2017, was paying nearly 90 percent of their earnings toward housing; the top 5 percent was paying about 10 percent.
Among those renting, regardless of income level, the percentage of income being spent on housing has tracked wages pretty evenly. Among homeowners, the percentage of income being spent on housing has dropped significantly at almost every income level except the lowest 10 percent.
What does all this mean here in the Monadnock Region? Well, with demand outstripping supply of apartments, rents in the area continue to run above what might be expected, as a percentage of income. We’ve previously noted the average two-bedroom apartment in Cheshire County would cost what amounts to well over 100 hours per week of work for someone making minimum wage.
Higher wages would help, but so would a greater supply of affordable housing options. It seems what housing complexes are being built in the area are mainly targeting wealthy seniors and higher-income renters. That makes business sense, but does little to solve the crunch on lower-level earners.
Another approach, being considered in Congress, is to offer tax credits to those whose housing costs exceed a certain percentage of their monthly income. That shows promise, but needs to include provisions so as not to incentivize people to seek out more-expensive housing than they can really afford.
Between the social and economic justice agendas of Democratic lawmakers in control of the state Legislature and, in Washington, the House, and the developing platforms of nearly two dozen candidates for president in 2020, it will be interesting indeed to see whether any additional proposals emerge that have the prospect of being enacted to help ease this crunch.