Unaffordable Housing: What is it and How Does it Affect Us?

Unaffordable housing is a very heavy problem, and will not be changed unless there are people there to fix it. Because this generation has the most problems with it, the next generation needs to become aware, because awareness is the first step to change. High school students should know how the cost of housing is becoming unaffordable, because they will eventually be buying or renting their own place. "The cost of rent and utilities for a typically two-bedroom apartment has increased more than a third since 1999."

Affordable housing is a dwelling where the total housing costs are affordable to the people living in that dwelling. It is quite simple to determine if a dwelling is affordable of unaffordable. A primary factor in housing affordability is household income. This is important for the housing companies, because it helps them find out how many homes they can build and if the buyers or renters will be able to afford. Similar to affordability, there are two simple measures of economic living standards. A household can afford 2 ½ times its annual income. Lets say that your annual income is $40,000. This means that according to national standards, you can afford a house that is $85,000. The national ratio of 2.6 is similar to the commonly used benchmark of ability to purchase a house. In addition to that, a monthly contract rent can be divided by monthly income. The result is a percentage. The national figure is just below 15%. You annual income is still 40,000, making your monthly income $3,333 and you are renting an apartment for $2,000 a month. This means that the percentage is 6%. This means that the apartment is unaffordable for you.

When the monthly costs of a home exceed 30% - 35% of a household income then the housing is considered unaffordable for that household. In 1998, the average cost for housing and utilities was $576. In 2003, a worker nationwide would need to earn at least $15.21 an hour, in order to attain affordable housing. Also, in 2005, a typically priced home cost $332,000, meaning wage earners had to make $88,400 to spend 30% of household income on housing costs. The median income that year however was $60,700. For that income, a $228,100 home would be considered affordable. By state, all of the highest ratios of home value to income were either in the West, or Northeast. Hawaii, with a ratio of 6.3, and California at 5.5 led the list. This means that in Hawaii, your income would be half of your housing costs, and in California, your income would be equal to your housing costs. The next nine highest ratios were in states in New England or along the middle Atlantic Coast.

When supply of available housing is significantly less then the demand, many low and moderate-income households cannot secure housing that is affordable. Demand can be measured in terms of the cost for housing type, and location for housing. The most, "affordable" places in the US are where there is the least demand and an adequate supply. The main reason why housing is becoming affordable is that land values are increasing faster than incomes. At the same time, many are buying houses they cannot afford. The primary factor in this dilemma is that homeowners are competing with others. This is a prime example of, "Keeping up with the Joneses". This means that competition is what is mainly fueling the housing problem. In order for housing to become affordable, homeowners need to buy houses that they can afford.