Boston.com / News / Census

Debunking housing myth

Relative costs here moderate, not high, compared to other cities, Census finds

By Scott Bernard Nelson, Globe Staff and Bill Dedman, Globe Correspondent, 6/6/2002

irst-time home buyers suffering sticker shock might be skeptical, but new Census 2000 data released this week call into question the widely held assumption that Massachusetts residents have to dig deeper to pay for housing than people in other parts of the country.

A Globe analysis of the numbers collected in the decennial survey found that fewer people in the Boston area spend a high proportion of their income on housing than in many other cities, including San Diego, Las Vegas, and even Philadelphia.

In a sorting of the country's 377 metropolitan statistical areas by the proportion of households claiming to spend 35 percent of gross income or more on home ownership, Boston ranks 84th. Among the country's 50 biggest metro areas, Boston falls almost exactly in the middle in terms of the so-called housing burden.

In short, while housing does cost more here than in most other parts of the country, fatter paychecks help make up the difference. That reality belies the widespread impression that Boston is at an economic disadvantage to other cities because workers can't find affordable housing.

"That's a bit counterintuitive for people who live here and buy houses here," said Alan Clayton-Matthews, an economics professor at the University of Massachusetts at Boston. "But we have a lot of people with high incomes, and I would suspect that's why we look reasonable."

Home-ownership costs for the purposes of the census were defined as what people estimated to be their monthly mortgage payments and expenditures for upkeep of the home.

The explanation for the census numbers is, indeed, twofold. Eastern Massachusetts fared disproportionately well during the economic prosperity of the 1990s, pushing incomes sharply higher in industries such as biotechnology, computer data storage, and finance. At the same time, the Boston housing market fell during the early 1990s before resuming growth averaging 15 percent per year in the middle of the decade.

Wellesley College economics professor Karl Case said it's also important to note that the years since Census 2000 have changed both income levels and housing costs considerably. Still, he called the trend "an interesting story" that will catch many New Englanders by surprise.

"It's not as bad here as people think; I really believe that," Case said. "Except if you don't have one of those high salaries, in which case numbers like this aren't much consolation."

For Census 2000 data on housing, go to www.boston.com/

census.

Case, cofounder of the real estate research firm Case Shiller Weiss Inc., also said the census numbers don't reflect the cost of new homeowners to buy. Mortgage holders who bought their homes years ago -- and those who refinanced to low interest rates -- weigh heavily on the averages, he said.

Regardless, the numbers do tell an interesting story, both here and nationally. Across the country, the proportion of those who told the census bureau that they pay relatively little for home ownership -- less than 15 percent of their income -- fell from 40 percent in 1990 to 37 percent in 2000. At the other end of the spectrum, the proportion of people who claim to pay more than 35 percent of their income to cover the mortgage increased from 13.5 percent of respondents to 15.8 percent.

In between the two extremes, the proportion changed little.

The burden at the top end does vary widely by region, though, from a low of 11 percent in the Upper Midwest to a high of 22 percent in the Pacific states. New England falls in between, with about 16 percent of households reporting that they shell out at least 35 percent of income to cover housing costs.

"Some areas have larger immigrant populations, with lower incomes and a lot of new mortgages," said Mark Zandi, chief economist at Economy.com. "Some areas, like Boston, have a higher proportion of people with no mortgages at all. In other isolated areas, like Alaska, housing tends to be relatively high because it's so costly to get building materials. The reasons are pretty varied."

The specific locales with the highest housing burdens are spread across the country, in any case, without necessarily conforming to the regional averages.

Some areas benefited from a huge influx of residents during the 1990s, which boosted housing demand and pushed up prices. Colorado took in almost 1 million people between the 1990 and 2000 censuses. Others, like Nantucket and Martha's Vineyard, are geographically limited in terms of housing supply, which pushed the burden higher.

Californians are "in love with their homes" and willing to shoulder higher mortgage payments, Zandi said, so it makes sense that more people would be in the most-burdened category there.

It's impossible to make an accurate census-to-census comparison of housing burden between individual metropolitan areas, because some of the boundaries changed between 1990 and 2000. If you compare Boston proper with the 100 biggest cities, though, its relative standing changed little during the decade.

In both the 1990 and 2000 census surveys, roughly one in five Boston residents fell into the category of those paying the largest proportions of their income for housing. In the earlier survey, though, Boston ranked 19th out of the top 100 cities by the measure. By 2000, it had fallen to 31st.

So it's not that housing costs went down in the Boston area in the 1990s. But the census data show that housing costs increased far faster elsewhere. While Boston housing costs increased by about 1 percent during the decade after taking inflation into account, they jumped almost 10 percent in Miami and more than 8 percent in Seattle.

"It's a complicated story as to why some markets moved so much [on housing burden]," said Case. "Some of those areas -- Seattle, Denver, Miami, California, the Middle Atlantic -- are driven by home-price appreciation. Others, like Mississippi, are obviously driven by slow income growth. The biggest drivers, I think, are interest rates and the size of mortgages."

Interest rates are important, Case said, because the Federal Reserve pushed them to such a low level in the late 1990s that homeowners with existing mortgages refinanced by the millions. The result was substantially lower housing costs for a large segment of the population, especially in areas like Eastern Massachusetts with a larger-than-average contingent of existing homeowners.

Still, the whole idea sounds questionable to Massachusetts homeowners signing what feel like awfully big mortgage and rent checks each month. In inflation-adjusted dollars, monthly mortgage payments in the City of Boston increased 8 percent -- from an already sky-high level -- between the 1990 Census and the survey a decade later.

That growth rate, though, puts the city below the middle of the pack among major metropolitan areas. Mortgage payments skyrocketed 43 percent in Portland, Ore., for example.

If you rank the 50 largest metropolitan areas by median monthly mortgage payment, Boston is the 10th-highest, at $1,535. The San Francisco metro area tops the list with an average mortgage payment of $2,108, and various suburbs of the Bay area and of New York City also come in higher than Boston. Even residents of Orange County, Calif., and San Diego pay higher monthly mortgages than Bostonians.

If you rank just the City of Boston -- rather than the entire metro area -- among the 100 largest cities, it comes in with the 19th-highest monthly mortgage payment, at $1,370. The highest is Honolulu, at $1,771, followed by the same groups of cities that topped the metro-area list.

Among the same cities a decade ago, Boston ranked 15th out of 100. So, again, the relative housing costs in the region have fallen.

Suffolk County, which includes Boston, didn't see its proportion of overburdened homeowners change appreciably between the 1990 and 2000 census counts. The surrounding area, though, became relatively cheaper as higher-income people swapped a longer commute for more affordable housing. Worcester, Essex, and Middlesex counties all moved far down the housing burden lists, and Bristol and Plymouth showed some improvement, too.

It's noteworthy, furthermore, that the proportion of Boston area renters who told the census they spend more than 35 percent of their houshold income on rent payments is also near the middle of the pack nationally. The Boston metro area ranks 161st of the 377 metro areas in America by that measure.

Zandi, of Economy.com, said the census numbers might be slightly skewed in both cases by the fact that the surveys ask people to estimate their own incomes and housing costs. He said there tends to be some level of exaggeration in those numbers, especially when times are good, as they were in the Boston area in 1999.

"Housing is not a cheap commodity in Boston, so the census numbers may overstate the case," he said.

Scott Bernard Nelson can be reached at nelson@globe.com.


Debunking housing myth Relative costs here moderate, not high, compared to other cities, Census finds By Scott Bernard Nelson, Globe Staff and Bill Dedman, Globe Correspondent, 6/6/2002 irst-time home buyers suffering sticker shock might be skeptical, but new Census 2000 data released this week call into question the widely held assumption that Massachusetts residents have to dig deeper to pay for housing than people in other parts of the country. A Globe analysis of the numbers collected in the decennial survey found that fewer people in the Boston area spend a high proportion of their income on housing than in many other cities, including San Diego, Las Vegas, and even Philadelphia. In a sorting of the country's 377 metropolitan statistical areas by the proportion of households claiming to spend 35 percent of gross income or more on home ownership, Boston ranks 84th. Among the country's 50 biggest metro areas, Boston falls almost exactly in the middle in terms of the so-called housing burden. In short, while housing does cost more here than in most other parts of the country, fatter paychecks help make up the difference. That reality belies the widespread impression that Boston is at an economic disadvantage to other cities because workers can't find affordable housing. "That's a bit counterintuitive for people who live here and buy houses here," said Alan Clayton-Matthews, an economics professor at the University of Massachusetts at Boston. "But we have a lot of people with high incomes, and I would suspect that's why we look reasonable." Home-ownership costs for the purposes of the census were defined as what people estimated to be their monthly mortgage payments and expenditures for upkeep of the home. The explanation for the census numbers is, indeed, twofold. Eastern Massachusetts fared disproportionately well during the economic prosperity of the 1990s, pushing incomes sharply higher in industries such as biotechnology, computer data storage, and finance. At the same time, the Boston housing market fell during the early 1990s before resuming growth averaging 15 percent per year in the middle of the decade. Wellesley College economics professor Karl Case said it's also important to note that the years since Census 2000 have changed both income levels and housing costs considerably. Still, he called the trend "an interesting story" that will catch many New Englanders by surprise. "It's not as bad here as people think; I really believe that," Case said. "Except if you don't have one of those high salaries, in which case numbers like this aren't much consolation." For Census 2000 data on housing, go to www.boston.com/ census. Case, cofounder of the real estate research firm Case Shiller Weiss Inc., also said the census numbers don't reflect the cost of new homeowners to buy. Mortgage holders who bought their homes years ago -- and those who refinanced to low interest rates -- weigh heavily on the averages, he said. Regardless, the numbers do tell an interesting story, both here and nationally. Across the country, the proportion of those who told the census bureau that they pay relatively little for home ownership -- less than 15 percent of their income -- fell from 40 percent in 1990 to 37 percent in 2000. At the other end of the spectrum, the proportion of people who claim to pay more than 35 percent of their income to cover the mortgage increased from 13.5 percent of respondents to 15.8 percent. In between the two extremes, the proportion changed little. The burden at the top end does vary widely by region, though, from a low of 11 percent in the Upper Midwest to a high of 22 percent in the Pacific states. New England falls in between, with about 16 percent of households reporting that they shell out at least 35 percent of income to cover housing costs. "Some areas have larger immigrant populations, with lower incomes and a lot of new mortgages," said Mark Zandi, chief economist at Economy.com. "Some areas, like Boston, have a higher proportion of people with no mortgages at all. In other isolated areas, like Alaska, housing tends to be relatively high because it's so costly to get building materials. The reasons are pretty varied." The specific locales with the highest housing burdens are spread across the country, in any case, without necessarily conforming to the regional averages. Some areas benefited from a huge influx of residents during the 1990s, which boosted housing demand and pushed up prices. Colorado took in almost 1 million people between the 1990 and 2000 censuses. Others, like Nantucket and Martha's Vineyard, are geographically limited in terms of housing supply, which pushed the burden higher. Californians are "in love with their homes" and willing to shoulder higher mortgage payments, Zandi said, so it makes sense that more people would be in the most-burdened category there. It's impossible to make an accurate census-to-census comparison of housing burden between individual metropolitan areas, because some of the boundaries changed between 1990 and 2000. If you compare Boston proper with the 100 biggest cities, though, its relative standing changed little during the decade. In both the 1990 and 2000 census surveys, roughly one in five Boston residents fell into the category of those paying the largest proportions of their income for housing. In the earlier survey, though, Boston ranked 19th out of the top 100 cities by the measure. By 2000, it had fallen to 31st. So it's not that housing costs went down in the Boston area in the 1990s. But the census data show that housing costs increased far faster elsewhere. While Boston housing costs increased by about 1 percent during the decade after taking inflation into account, they jumped almost 10 percent in Miami and more than 8 percent in Seattle. "It's a complicated story as to why some markets moved so much [on housing burden]," said Case. "Some of those areas -- Seattle, Denver, Miami, California, the Middle Atlantic -- are driven by home-price appreciation. Others, like Mississippi, are obviously driven by slow income growth. The biggest drivers, I think, are interest rates and the size of mortgages." Interest rates are important, Case said, because the Federal Reserve pushed them to such a low level in the late 1990s that homeowners with existing mortgages refinanced by the millions. The result was substantially lower housing costs for a large segment of the population, especially in areas like Eastern Massachusetts with a larger-than-average contingent of existing homeowners. Still, the whole idea sounds questionable to Massachusetts homeowners signing what feel like awfully big mortgage and rent checks each month. In inflation-adjusted dollars, monthly mortgage payments in the City of Boston increased 8 percent -- from an already sky-high level -- between the 1990 Census and the survey a decade later. That growth rate, though, puts the city below the middle of the pack among major metropolitan areas. Mortgage payments skyrocketed 43 percent in Portland, Ore., for example. If you rank the 50 largest metropolitan areas by median monthly mortgage payment, Boston is the 10th-highest, at $1,535. The San Francisco metro area tops the list with an average mortgage payment of $2,108, and various suburbs of the Bay area and of New York City also come in higher than Boston. Even residents of Orange County, Calif., and San Diego pay higher monthly mortgages than Bostonians. If you rank just the City of Boston -- rather than the entire metro area -- among the 100 largest cities, it comes in with the 19th-highest monthly mortgage payment, at $1,370. The highest is Honolulu, at $1,771, followed by the same groups of cities that topped the metro-area list. Among the same cities a decade ago, Boston ranked 15th out of 100. So, again, the relative housing costs in the region have fallen. Suffolk County, which includes Boston, didn't see its proportion of overburdened homeowners change appreciably between the 1990 and 2000 census counts. The surrounding area, though, became relatively cheaper as higher-income people swapped a longer commute for more affordable housing. Worcester, Essex, and Middlesex counties all moved far down the housing burden lists, and Bristol and Plymouth showed some improvement, too. It's noteworthy, furthermore, that the proportion of Boston area renters who told the census they spend more than 35 percent of their houshold income on rent payments is also near the middle of the pack nationally. The Boston metro area ranks 161st of the 377 metro areas in America by that measure. Zandi, of Economy.com, said the census numbers might be slightly skewed in both cases by the fact that the surveys ask people to estimate their own incomes and housing costs. He said there tends to be some level of exaggeration in those numbers, especially when times are good, as they were in the Boston area in 1999. "Housing is not a cheap commodity in Boston, so the census numbers may overstate the case," he said. Scott Bernard Nelson can be reached at nelson@globe.com. This story ran on page C1 of the Boston Globe on 6/6/2002. � Copyright 2002 Globe Newspaper Company.