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Rental Affordability is Worst in Minority Neighborhoods

Renters in black and Hispanic communities spend a larger share of their income on rent than renters in predominantly white communities

- The gap between the share of income needed to pay rent in minority neighborhoods and white neighborhoods has widened over the past five years.

- In housing markets with good prospects for social mobility, the rent burden in minority neighborhoods is especially high.

- Monthly mortgage payments would require a smaller share of income than rent, but high rent burdens make saving for a down payment difficult.

Mar 30, 2017

SEATTLE, March 30, 2017 /PRNewswire/ -- Monthly rent is a bigger financial burden for people living in predominantly black or Hispanic neighborhoods than it is in white neighborhoods, according to a new Zillow analysisi of race and housing affordability.

Nationally, renters in predominantly black neighborhoods can expect to spend 43.7 percent of their income on rent, and renters in Hispanic communities can expect to spend 48.1 percent of their income on rent. In white neighborhoods, renters can expect to spend 30.7 percent of their income on rent, essentially in line with the standard rule of spending about 30 percent of income on housing.

In markets that offer the best opportunities for social mobilityii, paying the rent in minority communities is an even bigger financial burden, mainly due to significantly lower incomes in these communities. In San Francisco, for example, rent in predominantly black neighborhoods requires nearly three-quarters of the median income there. In largely Hispanic neighborhoods, renters can expect to spend 62.5 percent of their income on monthly rent.

When housing costs consume such a significant share of income, renters often have to make financial sacrifices, like putting off saving for a down payment, medical care and planning for retirementiii. Homeownership can be an important path to building wealth, but making the transition from renter to homeowner is a bigger financial challenge for renters living in mainly black or Hispanic areas.

"This research sheds light on another example of inequality in the housing market," said Zillow Chief Economist Dr. Svenja Gudell. "Renters in African-American or Hispanic neighborhoods find themselves in a catch-22 situation - while owning a home is a great way to build wealth, you need to save up some cash to be able to buy. If you're spending close to half of your income on rent, saving up that down payment is going to be incredibly difficult."

Rent affordability across the nation has diminished since 2011, as housing costs have outpaced income. It has worsened more in minority areas than it has in predominantly white neighborhoods. Over the past five years, the share of household income needed to pay monthly rent in black and Hispanic neighborhoods has increased by four percentage points and seven percentage points, respectively. In white communities, the share of income needed to pay rent has increased by three percentage points.

For those who are able to save up for a down payment and buy a home, monthly mortgage payments are much more affordable than rents across racial communities. In black communities, mortgage payments required 13.6 percent of the median household income. In Hispanic communities, they require 22.8 percent of the median income, and in white communities, 15.2 percent.

Metropolitan Area

Share of Income
Needed to Pay
Rent in White
Communities,
2016

Share of Income
Needed to Pay
Rent in Black
Communities,
2016

Share of Income
Needed to Pay
Rent in Hispanic
Communities,
2016

United States

30.7%

43.7%

48.1%

New York/Northern New Jersey

37.8%

57.5%

67.5%

Los Angeles-Long Beach-Anaheim, CA

50.0%

63.7%

63.0%

Chicago, IL

29.6%

51.6%

42.4%

Dallas-Fort Worth, TX

30.4%

41.1%

39.8%

Philadelphia, PA

29.3%

47.2%

54.4%

Houston, TX

30.3%

42.9%

41.8%

Washington, DC

26.1%

40.0%

36.3%

Miami-Fort Lauderdale, FL

41.7%

58.2%

55.1%

Atlanta, GA

26.8%

32.2%

39.9%

Boston, MA

34.8%

71.2%

59.5%

San Francisco, CA

48.8%

74.8%

62.5%

Detroit, MI

27.9%

37.1%

34.5%

Riverside, CA

36.1%

N/A

42.7%

Phoenix, AZ

29.1%

N/A

39.6%

Seattle, WA

34.8%

N/A

N/A

Minneapolis-St Paul, MN

27.8%

59.8%

N/A

San Diego, CA

45.1%

N/A

57.6%

St. Louis, MO

24.8%

36.2%

N/A

Tampa, FL

35.0%

54.0%

43.3%

Baltimore, MD

27.5%

43.1%

N/A

Denver, CO

35.2%

N/A

50.1%

Pittsburgh, PA

26.7%

47.0%

N/A

Portland, OR

37.1%

N/A

N/A

Charlotte, NC

27.7%

36.2%

38.8%

Sacramento, CA

33.4%

N/A

45.7%

San Antonio, TX

29.4%

N/A

35.0%

Orlando, FL

32.7%

42.8%

38.2%

Cincinnati, OH

27.1%

51.4%

N/A

Cleveland, OH

28.2%

44.1%

N/A

Kansas City, MO

25.4%

34.0%

32.5%

Las Vegas, NV

27.5%

37.0%

34.3%

Columbus, OH

28.4%

35.6%

N/A

Indianapolis, IN

25.2%

35.9%

N/A

San Jose, CA

43.6%

N/A

60.4%

Austin, TX

32.0%

N/A

43.8%

 

Zillow

Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

i To estimate the percent of income spent on monthly rent and mortgage payments by racial communities, we categorized census tracts by their racial pluralities. Once census tracts were categorized, we used census tract-level median household income from the U.S. Census Bureau alongside the Zillow Home Value Index (ZHVI) and Zillow Rent Index (ZRI) to calculate rent and mortgage burdens in census tracts. We then aggregated census tracts up to the metropolitan area and national level, requiring that the racial community make up at least 1% of the population in the metro.
ii https://www.zillow.com/research/social-mobility-housing-costs-12138/
iii https://www.zillow.com/research/rent-burden-sacrifices-9969/

 

SOURCE Zillow

For further information: Lauren Braun, Zillow, press@zillow.com


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