While the U.S. foreclosure crisis has resulted in a historic drop in home prices, a new Center for Housing Policy report released today reveals that housing affordability has actually worsened for America’s families.

 

The report, Housing Affordability Trends for Working Households, examines the relative affordability of housing for low- and moderate-income working owners and renters between 2005 and 2008. The report’s analysis finds that the share of working owners with a severe housing cost burden – that is, the share of households spending more than half their income on housing – rose from 18 to 20 percent during the three-year period studied. The share of working renters spending more than half their income on housing stayed essentially the same between 2005 and 2008 at approximately 22 percent.

One of the main reasons why home price declines have not improved housing affordability is that most homeowners have not moved since the foreclosure crisis started and, as a result, have not benefitted from the lower prices. Other reasons why housing affordability has worsened include: utility costs that have grown at more than double the rate of inflation, increasing housing payments due to adjustable-rate mortgages resetting, and an unemployment rate that began trending up in the last year of the time period studied.

"More than 20 percent of low- to moderate-income working households spend at least half their income on housing – and double-digit unemployment rates in many states are threatening to push more of America’s families into financial instability," said Jeffrey Lubell, executive director of the Center for Housing Policy. "Despite the fiscal crisis, there is a pressing need to prioritize policies and programs that reduce housing costs, such as financial incentives for energy-efficient home improvements, mortgage modification programs and federal housing vouchers."