Gap between buying and renting a home in CT widens

For Rent sign (Mark Moz / Creative Commons)

Washington – The median cost of keeping a roof over one’s head in Connecticut has been coming down in recent years for homeowners but rising for renters, widening an affordability gap between those who own their homes and those who don’t.

Low mortgage rates and home prices that have not recovered completely in many neighborhoods from the housing bust of 2008 have made owning a home more affordable. Meanwhile, rising rents have made leasing an apartment or house more expensive.

According to the U.S. Census Bureau, the median monthly 2010 household cost for homeowners with mortgages in Connecticut was $2,068 and the average rent was $992.

In 2016, the median homeowner cost had dropped to $1,997 and median rent increased to $1,115.

Connecticut’s housing trend follows a national trend, although rents and homeowner costs in the state are higher than the national average.

In 2010, the national median monthly homeowner cost was $1,496 and the median rent $885. The median national homeowner cost dropped to $1,466 in 2016, while, nationally, rents rose to $992.

Analysts say those wealthy enough to own real estate benefit from lower mortgage rates and tax deductions while renters are being hit with rising housing costs, which hamper their ability to save enough to buy a home.

“After the real estate market tanked, people were able to refinance and lower their costs,” said Erin Kemple, executive director of the Connecticut Fair Housing Center.

But not everybody was able to do that, she said. Only those with good credit and good incomes could take advantage of plunging interest rates – and bargain prices for homes after the market collapse.

Lower-income families got squeezed out of the housing market, especially since banks were required by federal law to tighten the requirements for mortgage loans.

The squeeze on the state’s poorest families and individuals has become even tighter as state and federal subsidies to help them pay housing expenses have been frozen at the same level or dropped.

“We are aware there is an affordable housing crisis in Connecticut,” Kemple said.

Minorities and younger Americans, many of whom are hampered by student debt, are especially at risk of being locked out of homeownership.

The ‘rent burden’

The gap between homeowners and renters in the state is also seen in the “burden” posed by the cost of shelter.

In 2016, more than half, 51 percent, of renters in Connecticut spent 30 percent or more of their household incomes on housing. Meanwhile only 30.7 percent of homeowners in Connecticut spent more than 30 percent of their household income on housing costs.

For Sale sign (Lyn Lomasi / Creative Commons)

The greatest reason renters are having a tougher time affording housing is that they are more likely to be poor compared with homeowners, and this gap has grown since the onset of the recession.

Mark Mather, of the Population Reference Bureau, a non-profit that specializes in collecting and supplying statistics needed for research, said there’s are other reasons, too.

Homeowners tend to be older than renters, in general, Mather said, “so they tend to be earning more money.”

He also said people were less willing to purchase a home after the real estate bust of 2007, placing rental properties in higher demand and raising the cost of those units.

Demand for rental properties also increased because Millennials are “delaying buying homes and starting families,” Mather said.

To Mather, the surge in rents has contributed more to the housing gap than the benefits homeowners have had from falling interest rates and the slow recovery of the real estate market.

There’s always been a gap, Mather said, but it has never been as wide. In 1999, for instance, 22 percent of homeowners nationwide paid 30 percent or more of their household income on housing expenses, and 39.9 percent of renters paid 30 percent or more.

New York University’s Furman Center release a report last week that studied rental costs in 53 metropolitan areas across the nation, including Hartford.

It determined that virtually all metro areas had increases in inflation-adjusted median rents between 2012 and 2015 and that the national average rent in 2015 was $1,050 per month.

Hartford’s average rent was $1,090 in 2015, slightly above the national average, but it has not risen as rapidly as most other metropolitan areas, said Stephanie Rossoff, the data manager at the Furman Center.

The Furman Center’s study said the Hartford metro area has 464,613 households. It includes Hartford, Tolland and Middlesex counties.

The average homeowner’s household income in the Hartford metro area was $72,600. The average household income of a renter was about half of that, $36,600.

The city’s “rent burden,” index, those paying 30 percent or more of their household incomes on rent, remained stable at 46 percent from 2012 to 2015, Rossoff said.

The relative stability of Hartford’s rental market is linked to a vacancy rate of 7.4 percent.

“That’s pretty high,” Rossoff said.

Although it was unchanged in Hartford, the Furman Center report said the “rent burden,” fell by 1.2 percent across all metro areas in its survey, from an average of 48.9  in 2012 to 47.7 percent in 2015. It called the modest drop “an encouraging sign.”

The gap widens
Cost of Ownership v. Rental
2016 Median Owner Cost 2016 Median Rental Cost
Connecticut 1,997 1,115
Fairfield County 2,695 1,412
Litchfield County 1,852 1,039
Middlesex County 1,993 1,100
New Haven County 1,906 1,094
New London County 1,799 1,048
Tolland County 1,796 1,371
Windham County 1,620 872
U.S. Census Bureau American Community Survey

Burdened renters and homeowners
Percentage of burdened renters and homeowners in CT, surrounding metro areas and the national average
Area Percent of burdened renters Percent of burdened homeowners
Fairfield County metro 55% 35%
New Haven metro 55% 31%
Hartford metro 47% 27%
Worcester metro 46% 27%
New York metro 53% 36%
Boston metro 49% 28%
National average 48% 24%
Harvard Joint Center for Housing Studies, State of the Nation’s Housing 2017

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