One common method for analyzing housing affordability compares a household’s monthly housing costs, including utilities, to its pre-tax income to determine if the ratio surpasses a maximum affordable level. For most federal programs, this maximum level currently stands at 30 percent. Households with cost-to-income ratios that exceed this cutoff are defined to have an affordability problem, or “housing cost burden.”
Affordability problems have increased very rapidly among young renters. Between 2007 and 2011, the share of renters under age 25 with housing cost burdens increased by 6.2 percentage points, and that for renters aged 25 to 34 grew by 4 points. However, during the same period the proportion of owners in these two age groups with affordability problems declined by 4.3 and 5.8 percentage points, respectively. In fact, the share of homeowners in these two age groups with affordability problems in 2011 was lower than in 2005, prior to the onset of the housing crisis. Between 2007 and 2011, the sharp decline in affordability problems among young homeowners was not enough to offset large increases in rental affordability problems, resulting in an increase in the share of all households with cost burdens for those under age 25 and between the ages of 25 and 34.
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