Many spend half their pay on housing, study says

Massachusetts' inability to keep pace with the demand for housing is forcing 600,000 households to spend more than 30 percent of their income on rents and mortgages, and 250,000 of those are spending more than 50 percent -- making housing a major challenge for first-time buyers, according to a University of Massachusetts Donahue Institute study to be released tomorrow.

"The most striking thing we discovered is how the high cost of housing is not just affecting low-income families but middle-income wage earners as well," said Michael Goodman, the study's coauthor and director of Economic & Public Policy Research.

"Winners and Losers in the Massachusetts Housing Market," an analysis of 2000 US Census data, found that the state's failure to meet housing demand has created a three-class system of "haves," "have nots," and "hidden homeless," a growing class of people who live with relatives or friends because they can't find affordable housing.

The "haves" bought their homes in the early to mid-1990s, prior to the dramatic run-up in housing prices. Homeowners who bought back then have benefited from rising prices and low interest rates, the study found.

The "have nots" are low- and moderate-income people who must use more of their money to buy a home, or must pay increasingly high rents for a dwindling supply of rental apartments. Or they must seek cheaper housing far from job centers.

The third class, the "hidden homeless," appears to be the most obvious example of the failure to keep up with housing demand. The 2000 census found that this category, referred to as sub-families, has dramatically increased in size, the study said. The number of children in sub-families had about doubled since 1980, to 52,000 or so from 26,000.

In 2000, more than 600,000 households paid in excess of 30 percent of their income on housing -- up from 11,000 in 1990, the study found. The study also found that of this total, over 91,000 homeowners and 160,000 renters paid more than 50 percent of their income on housing in 2000.

While lenders routinely approve mortgages for first-time buyers with a debt-to-income ratio of 33 percent, the US Department of Housing and Urban Development defines affordability as having to spend no more than 30 percent of income on housing.

Between 1990 and 2000, the number of owner-occupied households paying more than 30 percent of income on housing grew by 30,000 to 269,000, or to 22 percent of all homeowners in Massachusetts, the study found.

In addition, nearly one-third of the people paying more than 30 percent had bought their homes in 1999 and 2000.

In Greater Boston, more than 41 percent of all homeowner households making below the median household income of $50,515 a year pay over 30 percent of that amount for housing, the study said.

Statewide, 37 percent of those earning the median income pay more than 30 percent of their income for housing.

The study also found that 39 percent of renters paid 30 percent or more for housing in 2000; among homeowners, 22 percent paid 30 percent or more.

Also, according to the study:

The pace of housing construction largely explains why prices have increased. Between 1990 and 2000, the number of new households in Massachusetts grew by 8.7 percent, but the number of new housing units increased by 6 percent. To keep pace, builders would have had to produce 70,000 more housing units statewide than they did.

From 1990 to 2000, there was a significant loss of two-family homes, five- to nine-family homes and 10- to 19-family structures. During the 1990s, 37,563 new multi-family units were built, but 20,236 units were lost.

From 1990 to 2000, 157,000 single-family homes were built, while only 17,327 new multifamily units were added.

More land is being used to build fewer houses. From 1971 to 1985, two new single-family homes were built per acre used. From 1985 to 2000, single-family housing was built at a density of 1.3 units per acre.

The study concludes that the disparity between supply and demand has driven the cost of housing to unmanageable levels. The study urges the construction of more multifamily units, as well as more densely built, single-family developments, to relieve the pressure on first-time buyers.

Aaron Gornstein, director of Citizens Housing & Planning Association, a cosponsor of the study with the Massachusetts Housing Partnership, said leadership is needed on Beacon Hill if housing production is to be increased.

"We need the governor, Legislature, and local leaders to offer solutions that will help alleviate the financial pressures that people are under in terms of housing costs," he said.