Housing Recovery Has Left a Heavy Cost Burden for Some

The number of people with excessive housing cost burdens is showing “an inexorable climb.” Image: Fotolia.

Excessive housing cost burden is a big negative in a housing market that is continuing to turn around, according to an annual study by the Harvard Joint Center for Housing Studies.

And the number of people with excessive housing cost burdens is showing “an inexorable climb,” according to the report. For 2011, more than 40 million households “were at least moderately cost burdened” (meaning they pay more than 30% of income for housing). And more than 20 million of them were severely burdened, paying more than half their incomes.

Compare these numbers with 2007 when they were 2.6 million households lower, and a decade ago when they were 6.7 million lower, and you see the depth of the problem. The center points out that it hits lower-income people the worst, with 70% of those making about the minimum wage severely cost burdened.

On the multifamily side of the ledger, owners are benefiting and lending is off the hook. But renters are not benefiting much.

Renters in Las Vegas, Albuquerque, Greensboro and Tucson saw a small decrease in rents last year, according to a MPF Research study cited by Harvard. But the other 89 MSAs they track showed increases, some substantial. Rents in Honolulu, always an expensive market, jumped by 8% last year, and San Francisco and San Jose were nearly that high.

Multifamily owners took in a nice 6% increase in revenue as demand for apartments continues to tax supply. Median rents for new units were at their highest ever last year, at $720.

Overdues are down, for multifamily loans made by banks and thrifts, those held by Fannie Mae and Freddie Mac, and those packaged into commercial mortgage-backed securities.

Last year was a very hot year for multifamily loans. The number of loans was up 36%, according to the Mortgage Bankers Association. The fourth quarter was even hotter, at an increase of 49%. The total amount of multifamily debt also grew, but much more modestly, at 2%, the Harvard report notes.

Is there a bubble coming on the multifamily side? Probably not. As purchase mortgages remake the market (unless there is a sharp increase in rates) multifamily should see a slowdown, as these two niches are usually countercyclical to each other. Plus, we live in a bubble-weary world these days.