In February, the National Housing Conference published a report that looked at severe housing cost burdens across the country. North Dakota fared very well with 11 percent being severely cost burdened – well below the 15.6 percent national average. That report, which was examined in an article in Governingmagazine, prompted an email from a legislator asking about the numbers and the conflicting stories about “affordability” that we hear every day.
While it is interesting to see how North Dakota sits compared to the rest of the nation, the numbers from the report need to be taken in a much larger context.
Lately, “affordable housing” has become a vague or misrepresented term. Generally, when a household spends 30 percent or less of their gross income on housing and utility costs it is considered to be “affordable.” Households are cost burdened when they spend more than that on housing and are severely cost burdened when they spend more than half of their gross income on housing.
The NHC report looked only at “working households,” which are those with members working a total of at least 20 hours a week and household income that does not exceed 120 percent of area median income. The report shows that there were 132,904 households fitting this description in North Dakota in 2012 and that 15,012 or 11.3 percent were severely cost burdened.
The significant and growing number of senior households that are no longer in the workforce are not contemplated in the study. North Dakota has more than 64,000 households that are 65 or older and that is projected to reach more than 98,000 by 2025 as the Baby Boom generation ages. Cost burdens affect these households at a higher rate both in homeownership as well as renters. These fixed income households with an average income of $41,346 are less able to tolerate increases in housing costs than working households.
It is not surprising that North Dakota’s numbers look comparatively better than the rest of the country – especially when North Dakota led the nation in personal income growth in 2013 – but that shouldn’t be taken as an indication that everything is fine. There are thousands of households that struggle every day to balance housing with other costs like food, child care, transportation and medical expenses. When a household has to spend half of its gross income on housing, the budget decisions for the other half get very tough and sometimes important needs can get neglected.
Housing burdens also negatively impact the economy, in general, as there is less discretionary spending. Business expansion and growth can be hampered when there are not affordable housing options because of the difficulty of recruiting and retaining workers. Shortages of affordable housing options for workers are not just an oil patch concern; in fact, companies in Grand Forks, Jamestown and Valley City have felt the pinch of a tight housing market.
While housing construction has been happening at record pace in many areas of the state, the NHC report further illustrates the importance of truly affordable housing options for lower income households. Thanks to the Housing Incentive Fund, North Dakota has significantly increased the production of housing units targeted to these households, but there is certainly much more to do in the years ahead.
NDHFA executive director