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Long Island renters were hit hardest when home values slumped
Home values may have plummeted during the recent crash, but the burden of housing costs increased dramatically for working people in the New York City, Long Island and northern New Jersey region.
About 35 percent of local working households spent more than half of their income on housing in 2011, according to a study by the Center for Housing Policy, a higher share than all but two metropolitan areas and up 4.2 percent from 2008.
The study, released earlier this month, explains exactly how working people were impacted by the real estate crash. It turns out, while much of the discussion surrounding the recession focused on homeowners, renters suffered disproportionately between 2008 and 2011.
That's because as foreclosures increased and salaries decreased, the share of households seeking rental living arrangement increased. By the same token, the difficult economic climate left builders hesitant to add to the supply of existing units. Consequently, rental prices grew substantially -- by an average of 5.9 percent nationwide during the four-year period.
"What we’re seeing with the rental market is not explainable by population trends alone—it clearly reflects the movement of former homeowners into rentals as well as delays in home purchases by current renters,” Maya Brennan, a co-author of the report, said in a statement.
On the other hand, the costs associated with owning a home actually decreased thanks to plummeting mortgage rates and home prices. In fact, nationally, the share of income dedicated to housing jumped 3.6 percentage points for renters compared to just a 0.1 percent uptick for renters over the four-year period.
So large metro areas with a high population of renters, including the New York City, northern New Jersey and Long Island region, felt the biggest burden of increased housing costs. Over the aforementioned four-year period, the number of households that spent 50 percent or more of their income on housing costs rose to 35.1 percent from 30.9 percent in the greater New York area. Only households in Miami (41.2 percent) and Los Angeles (39.0 percent) had it worse.
By contrast, in 2008, the New York metro area ranked sixth in severely burdened households.
Statewide, the share of those overburdened by housing costs increased to 30.0 percent from 26.4 percent. Both figures were far greater than the national average, which hit 23.7 percent in 2011, up from 21.8 percent in 2008.
As lead author Janet Viveiros noted in a statement: "Spending most of your paycheck on rent means cutting back on other necessities, including health care and even food."
It's a surprising perspective at a time when many are touting the benefits and flexibility of renting over the perceived downsides of home ownership.