Over 40 million Americans spend more than 30% income on housing

It is estimated by Harvard’s Joint Center for Housing Studies that over 40 million American households are spending more than 30% of their net total household income on their housing. Almost every expert recommends that households spend no more than 30% of their net income on shelter type expenses, so those 40 million Americans are spending more each month than what is considered to be “safe”.

For some people they need to spend that percent of their income on housing due to income and/or cost of living issues. For others, they could spend less but they decide to live in a bigger or nicer house or apartment than they could otherwise comfortably afford. The bottom line is that 40 million Americans equates to about 30% of all US households.

High cost of housing

As we indicated, the cost of housing has been increasing in this country faster than the wages of many jobs, with some blue collar and/or “non-professional” type jobs falling further behind. Those positions may be retail clerks, servers, cooks, drivers, and countless other mostly service type roles. In fact the Harvard study also showed for tenants that are working a minimum wage job at 40 hours per week, that they could only afford a one-bedroom home to rent in 12 counties nationwide as their wages just do not support the high cost of housing in most parts of the country.

Now that study is kind of questionable as most companies now pay hourly rates over the basic minimum wage and many states/cities also put laws into place that mandate a minimum wage that is much higher than the federal government requirement. But the point being that if you work for a low wage, it is tough to afford the rent as well as the other costs of housing. Many of them turn to rental assistance programs for help.

Another alarming stat from Harvard’s Joint Center for Housing Studies is that of the 40 million Americans that spend more than 30% of their net income, about ½ of those (or 19 million Americans) spend upwards of 50% of their income on housing costs, whether it is a mortgage or rent. That is living on the edge, as if anything goes wrong with that households finances they could be evicted and/or foreclosed on in a moment.

Recommended housing budgets

Most experts recommend that households spend no more than 30% of their net after tax earnings on their housing. This does not mean just the rent or mortgage, but it includes every single housing expenses. So the 30% recommended levels includes utility bills (water, heat, electric), any home repairs (if you own), property taxes (if you own a home), insurance (renters or home owners) maintenance, landscaping, and everything. Anyone that owns a house has to be even more aware of all these costs, as renters can often have some addressed by the landlord, such as repairs.

Now that 30% level of course may be easier said than done in many parts of the that country. But people can always live with a roommate, rent out an extra room, or take extra steps to meet goal. Or of course they can move to a different part of the country that is more affordable. While their “gross” income may not be as high when moving, when the cost of living is much less in the new area than a reduction in gross income the net effect is the family still often benefits by having more money each month to do as they wish. They come out ahead from cost of living benefits as well as a higher quality of life.

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