Many homeowners across the country have found themselves stuck in homes they can’t afford.
Whether it’s due to high interest rates or simply choosing to live beyond their means, homeowners spending more than 30% of their income on housing costs are considered “house poor.”
The “30% rule” is a popular standard for budgeting, which advises homeowners to avoid spending more than 30% of their income on housing expenses. But for many homeowners, it’s not an easy rule to follow.
These cost-burdened homeowners have found themselves facing budget-busting housing expenses such as monthly mortgage payments, property taxes, homeowners insurance and utilities.
In order to get a better understanding of where homeowners are living beyond their means, we analyzed monthly housing costs and median household income from more than 9 million households across the country via the U.S. Census Bureau.
Our analysis looked at the number of homeowners with a mortgage who spend more than 30% of their household income on housing costs.
Key Findings
- Miami, Los Angeles and New York City are the top three cities with the most homeowners living beyond their means. More than 4 in 10 homeowners are considered to be “house poor” in these cities.
- Cities located in Florida and California dominate the list of top 30 cities. Overall, six cities within the top 30 are in Florida and 14 are located in California.
- Nationwide, 27.4% of homeowners are considered “house poor.”
Which Cities Have the Most “House Poor” Homeowners?
Nearly 3 in 10, or 27.4% of U.S. homeowners with a mortgage are considered to be cost-burdened with housing expenses, according to the Census Bureau. Overall, 21% of cost-burdened homeowners have a household income of less than $75,000.
However, the number of cost-burdened homeowners living in the Miami metropolitan area far exceeds the national average. Overall, nearly 60% of homeowners living in Hialeah, Florida are living beyond their means, according to the Census.
Elsewhere, 44% of homeowners living in nearby Miami are cost-burdened. Los Angeles ranks No. 2, with 48.7% of homeowners considered cost-burdened, followed by New York City (45.3%).
Other states that also showed up were Massachusetts, Tennessee, Arizona
Top Five Cities With the Most House Poor Homeowners
#1. Hialeah, Florida
- Percentage of House Poor Homeowners: 59.3%
- Number of House Poor Households: 10,918
- Median Household Income: $64,386
- Median Monthly Household Costs: $1,632
- Median Yearly Household Costs: $19,584
#2. Los Angeles, California
- Percentage of House Poor Homeowners: 48.7%
- Number of House Poor Households: 179,821
- Median Household Income: $122,032
- Median Monthly Household Costs: $2,972
- Median Yearly Household Costs: $35,664
#3. New York City, New York
- Percentage of House Poor Homeowners: 45.3%
- Number of House Poor Households: 272,355
- Median Household Income: $120,618
- Median Monthly Household Costs: $2,848
- Median Yearly Household Costs: $34,176
#4. Miami, Florida
- Percentage of House Poor Homeowners: 44.6%
- Number of House Poor Households: 14,565
- Median Household Income: $92,897
- Median Monthly Household Costs: $2,308
- Median Yearly Household Costs: $27,696
#5. Hollywood, Florida
- Percentage of House Poor Homeowners: 44.3%
- Number of House Poor Households: 10,180
- Median Household Income: $98,131
- Median Monthly Household Costs: $2,039
- Median Yearly Household Costs: $24,468
Cities With the Most Budget-Minded Homeowners
Our analysis also took a look at cities with the most budget-minded homeowners. Not only do the majority of homeowners in these cities live by the 30% rule, but they go above and beyond it by spending less than 20% of their income on housing expenses.
For example, nearly two-thirds of homeowners in Huntsville, Alabama spends less than 20% of their income on housing costs. Nationwide, less than half of homeowners (47%) spend less than 20% of their income on housing expenses.
Elsewhere, nearly 60% of homeowners in Raleigh, North Carolina are budget-minded homeowners, followed by Pittsburgh, Pennsylvania (59.3%).
When it comes to owning a home, it’s always best to expect the unexpected.
Monthly housing expenses can build up and quickly eat away at your budget, especially when it comes to mortgages with high interest rates, second mortgages and property taxes.
While the 30% rule can help you gauge how much household income to set aside each month for housing costs, it’s also a good idea to speak with a financial advisor before purchasing a home. Mapping out your mortgage budget in advance can be the difference between being a “house poor” or a “budget-minded” homeowner.
Methodology
To determine our ranking, we analyzed median household income and median monthly housing costs across more than 9 million households located in the most populated 170 census-defined places via the U.S. Census Bureau’s American Community Survey. Cities were ranked based on the percentage of homeowners who spend more than 30% of their household income on monthly housing costs. The Census Bureau defines monthly housing costs as the sum of payments for mortgages, deeds of trust, contracts to purchase, or similar debts on the property (including payments for the first mortgage, second mortgages, home equity loans, and other junior mortgages); real estate taxes; fire, hazard, and flood insurance on the property; utilities (electricity, gas, and water and sewer); and fuels (oil, coal, kerosene, wood, etc.).
It also includes any applicable monthly condominium fees for condominiums, mobile home costs (personal property taxes, site rent, registration fees, and license fees). Selected monthly owner costs were tabulated for all owner-occupied units for units with a mortgage.
Sources: U.S. Census Bureau’s American Community Survey
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