Pew report describes housing affordability challenge in city

Housing prices and rents in Philadelphia have long been lower than in many other big cities. But over the past decade, as Philadelphia has shifted from a shrinking city to a growing one with an increased demand for housing, officials and advocates have expressed mounting concern about the degree to which the city remains affordable—and for whom. To assess the situation, The Pew Charitable Trusts conducted a detailed examination of housing data from Philadelphia and put the findings in the context of other large cities throughout the country, both the 10 largest high-poverty cities and the 10 most populous.

In analyzing housing affordability, this report focuses on the demand side of the equation—on the price of housing and people’s ability to pay for it—more than on the supply of units. In doing so, it relies heavily on the concept of cost burden: As defined by the Census Bureau and the U.S. Department of Housing and Urban Development, cost burden occurs when a household spends 30% or more of its income on housing costs, including rent, mortgage payments, utilities, insurance, and property taxes.

By this standard, about 231,000 Philadelphia households—or about 529,000 people—were cost-burdened in 2018, the last year for which data was available. In that year, 40% of the city’s households were cost-burdened, a figure that is in line with many other major cities. Surprisingly, perhaps, that rate has fallen slightly in Philadelphia in the past decade—it was 43% in 2009—largely due to an increase in the number of high-income households, for which cost burden tends to be low.

For homeowners, Pew’s research shows, Philadelphia is affordable for a big city but about average for one with a high poverty rate. For renters, it is relatively affordable for a big city but expensive for one with a high poverty rate.

Nationally, researchers have found that there are two distinct kinds of housing affordability issues in urban America: one primarily caused by high housing prices and the other a result of low income levels. In Philadelphia, the issue is more the latter than the former. Among the nation’s 10 most populous cities, none has a higher proportion of cost-burdened households with low incomes than Philadelphia. Despite Philadelphia’s relatively low housing costs, many city residents simply do not have enough income to find housing they can afford.

The problem is particularly acute for renters with incomes below $30,000 per year; 88% of them are cost-burdened, with 68% severely cost-burdened, meaning they spend at least 50% of their income on housing. The city’s supply of low-cost units is inadequate to meet the needs of this large group of households—there are nearly twice as many low-income renter households as housing units they can afford.

So who are the Philadelphians living in housing that they strain to afford? Among the findings, based largely on census data:

  • Sixty-nine percent of cost-burdened Philadelphia households have incomes below $30,000 per year. Only 12% have incomes of $50,000 or more. This pattern is quite different from other places. In New York and many West Coast cities, more than a quarter of all cost-burdened households earn at least $50,000 per year.
  • Half of all Hispanic households in Philadelphia are cost-burdened, the highest share of any major racial or ethnic group and a reflection, in part, of the city’s high poverty rate among Hispanics. By comparison, of those who do not identify as Hispanic, 46% of Black households and 32% of White households are cost-burdened.
  • Fifty-four percent of the city’s renters are cost-burdened—compared with 28% of homeowners—and renters are making up an increasing share of Philadelphia’s housing market. Of the growth in occupied housing units in the city since 2009, three-quarters were rentals.
  • Geographically, the cost burden rate is highest in North, West, and Southwest Philadelphia. Over the past decade, North Philadelphia, which is home to many of the city’s low-income residents, experienced a larger increase in rents and cost burden—in percentage terms—than any other part of the city.
  • Not surprisingly, being cost-burdened is least common among Philadelphia households that own their homes free and clear, without mortgages. But the number of low- and moderate-income homeowners who are mortgage-free has declined in the past decade.

To read the full report, go here.