The 30% rule has been in use since 1981 when the government found that people who spend over 30% of their income on housing were “cost-burdened.” The 30% rule of thumb has long been accepted in academic circles and by mortgage lenders as a spending threshold.
Using U.S. Census Bureau data, the organization found four cities in Washington state were on the list of the most cost-burdened areas: Tacoma (#22), Seattle (#108), Spokane (#112) and Vancouver (#126).
To determine the rankings, the team at Chamber of Commerce analyzed median household income and median monthly housing costs across more than 9 million households located in the most populated 170 census-defined places using the U.S. Census Bureau’s American Community Survey.
For the U.S. overall, 27.4% of households are considered cost-burdened, while 47.2% are classified as budget-minded. The Census Bureau defines monthly housing costs as the sum of payments for mortgages, deeds of trust, contracts to purchase, or similar debts on the property; real estate taxes, property insurance (fire, hazard, and flood); utilities (electricity, gas, and water and sewer); and fuels (oil, coal, kerosene, wood, etc.). Also included are applicable monthly fees for condominiums (such as homeowner dues or assessments), and mobile home costs.
That research also revealed cities with the most “budget-minded” homeowners, classified as those spending less than 20% of their income on housing costs. The same four cities in Washington state appeared on that list but in different rank-order: Seattle (#61), Vancouver (#62), Spokane (#104) and Tacoma (#132).
Cities in Washington state with the most cost-burdened homeowners
|Rank||City||Median household income||Median monthly housing costs||Yearly housing costs||% spending more than 30% of income on housing costs|
Cities in Washington state with the most budget-minded homeowners
|Rank||City||Median household income||Median monthly housing costs||Yearly housing costs||% spending less than 20% of income on housing costs|
Miami, Los Angeles and New York City have the highest number of cost-burdened residents with more than one or every four homeowners in each of those areas spending more than 30% of their income on housing. In Hialeah, Florida (near Miami) 59.3% of homeowners spend more than 30% on housing costs. Los Angeles ranks #2, with 48.7%, and New York City is third, with 45.3% stretched beyond 30%.
With the exception of New York City, the top 10 cities in the U.S. for “house poor” owners live in either California or Florida.
At the other end of the spectrum, where homeowners spend less than 20% of the income on housing costs, Huntsville, Alabama tops the list with 65.1% in that category. Cary, North Carolina ranks #2, with 59.8%, followed by Pittsburgh, Pennsylvania, at 59.3%.
From 2015 to 2019, the percentage of U.S. homeowners who were considered financially strapped dropped each year, from 29.4% in 2015 to 26.5% in 2019, according to a report by the New York Times. The pandemic is blamed for starting to erase those gains.
Chamber of Commerce is a product research company for real estate agents and entrepreneurs. The organization is a digital resource on various topics such as marketing, financing, accounting and human resources.