Rising Housing Costs Outpacing Income

LOS ANGELES -- The financial squeeze on Americans got tighter over the last decade as the increase in housing expenses far outpaced the growth in incomes, a new study shows.

Overall, yearly housing costs -- including not just mortgage payments and rent, but also such things as utilities and insurance -- rose by an average of $5,314, or nearly 65 percent, between 1996 and 2006, according to the report released this week by the Center for Housing Policy.

With so many families stretched thin by housing costs, they are even more likely to lock their credit cards in a drawer if they are nervous about falling stock prices or keeping their jobs. And that may make any economic recession even deeper.

"There are a lot of daily challenges that Americans are facing in meeting this full array of housing expenses, and incomes just haven't risen as much to be able to allow people to afford it," said Maya Brennan, who co-authored the study. "Utilities especially are looking like they're going to go up since 2006."

In 2007, more than 7.5 million people -- almost 15 percent of American homeowners with a mortgage -- were spending half of their income or more just on their mortgage, property taxes and insurance, according to U.S. Census data released last month. That is up from nearly 7.1 million the year before, according to an analysis by the Associated Press.

Traditionally, the government and most lenders considered a homeowner spending 30 percent or more of their income on housing to be financially burdened. But that definition now covers almost 38 percent of American homeowners with a mortgage -- 19 million of them.

In the study released Wednesday, researchers calculated housing expenses by tallying mortgage or rent plus the cost of utilities, property taxes, insurance, maintenance and other costs between 1996 and 2006.

Telephone costs were seen as mostly discretionary and left out.

Homeowners, who often pay a wider variety of utilities than renters, saw their utility bills jump 43 percent, with fuel oil and natural gas behind much of the increases.

The study found homeowners' housing expenses overall rose 66 percent, while renters' household expenses rose by 51 percent.

Incomes, however, did not begin to keep pace, climbing only 36.3 percent and 31.4 percent for homeowners and renters, respectively.

That's in contrast to the 1990s, when housing costs actually rose less rapidly than incomes, said Edward N. Wolff, professor of economics at New York University.