The U.S. and Philadelphia are finally recovering from the 2008 housing market crisis, with home prices reaching levels not seen since before the burst. Yet while homeownership is poised for takeoff, rental affordability and increasing rates of poverty stand in the way, according to a new report by Harvard researchers.
Harvard Research Center just released its annual State of the Nation’s Housing report and found that in general, the U.S. housing market is on the upswing as millions of millennials are expected to become homeowners in the next decade. Still, many obstacles remain—and all of them are prevalent to Philadelphia.
"The question is not so much whether families will want to buy homes in the future, but whether they will be able to do so," said Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies, in a statement.
1. Lack of rental affordability
Compared to cities like New York or San Francisco, Philadelphia is still considered an affordable place to live. Yet it remains one of the top 25 most expensive metros in the country, considering its low median income and high rental prices. Rental rates risen about 2 percent in Philadelphia in the last year.
Headship rates among this age group in the 25 least affordable metros are a full 10 percentage points lower than those in the 25 most affordable metros. Least affordable metros include high-cost areas such as New York and Los Angeles, but also Philadelphia, Fresno, and Lakeland, where rents are more moderate but still high relative to incomes.
2. Poverty problems
Across the board, poverty has become more concentrated in the U.S., the researchers write: "In 2014, 13.7 million people lived in neighborhoods with poverty rates of 40 percent or higher, up from 6.5 million in 2000."
Among the 10 largest U.S. cities, Philly has the highest deep poverty rate of 12.3 percent. Research shows that the city's population living in poverty grew by 60,000 people since 2000, and 44 percent of U.S. Census tracts experienced decreases in median income.
3. Lingering pressures on homeownership
The researchers suspect that homeownership rates are expected to increase as millennials move beyond the 20-30 age group. Yet student debt is a huge factor in preventing young adults for making the jump from renting to buying. In fact, the percentage of millennials with student debt jumped 17 percent from 2001 to 2013, while the average amount that borrowers owed jumped from $17,000 to $30,000 in real terms. The researchers write:
Although student loan payments should not limit the homeownership options of most households, this may not be true for the nearly one-fifth of indebted young renters whose payments exceed 14 percent of monthly income, a level the Consumer Financial Protection Bureau considers highly burdensome.
- Housing market bouncing back while affordability crisis grows [Curbed]
- Philadelphia is the best city for millennials [Curbed Philly]
- Philly’s poverty problem isn’t going away [Curbed Philly]
- Philly home values now at an all-time high [Curbed Philly]
- Philadelphia Real Estate Market Reports