Housing Affordability in Houston

Exploring housing-cost burden in our community

Housing costs are rising across Houston as the percentage of affordable housing units is decreasing, leaving almost half of renter households housing-cost burdened.

Why housing affordability matters to Houston

Housing is the single largest expense for many households and is becoming less affordable with time. In Houston, rising rents and property values are unevenly distributed across the city, and household incomes have not increased at the same rate as housing costs or rents. Paying more for housing means that less income is available to pay for other essential needs such as education, healthcare, and food. As rents and home values change in neighborhoods across the region, some households benefit from the transformation in social and built environments while others are economically challenged by rising housing costs and face displacement pressures.

The more we understand how housing expenses affect our communities, the more we can do to increase affordability for residents who need it most.

The data

Home values are growing throughout the region

According to estimates from the American Community Survey, the median home value in Fort Bend County rose from $198,539 to $264,000 between 2010 and 2017, an increase of 33%. The median home value in Montgomery County rose from $180,162 to $235,400 from 2010 to 2017, an increase of 31%. The median home value in Harris County increased from $149,383 to $174,000 from 2010 to 2017, an increase of 17%. The median home values in both Fort Bend and Montgomery counties are higher than the nation’s 2017 median home value of  $217,600; Harris County’s median home value is well below the national median. The change in home value in Harris County most closely resembles the change in home value across the state of Texas as a whole.

The Federal Housing Finance Agency House Price Index

The Federal Housing Finance Agency House Price Index (HPI) measures average price changes in repeat sales or refinancing on the same properties and serves as a timely indicator of house price trends.1 It provides a way to compare single-family house prices across different geographic regions that controls for distortions in the market. The average HPI for Houston was much lower than it was for the state or the nation. 

The HPI across the country has steadily increased since 1990, and fell during the latest recessionary period, but bounced back since 2012. The house price trends in the Houston metro area follow the overall trend in Texas. Housing prices remained steady in the 1990s and began rising steadily in the 2000s at a pace slower than the national average. 

55% growth in HPI since January 2012

In the Houston metro area, higher than the nation (42%) in that time period.

In 2017, the average annual  HPI for the U.S. was 425 and the HPI for Texas was 334. Harris County had an HPI of 200, higher than that of Fort Bend County and Montgomery County, but much lower than the state and the national HPI, although the median housing values in Fort Bend and Montgomery counties are higher than that in Harris County and the national average. This indicates lower average housing prices in repeat sales or refinancing than the nation and state. Overall, trends across the nation, state, and Houston area indicate increasing housing prices with faster growth beginning in 2012 for the state and local area that continues.  

Housing cost burdens remain steady, but rising rents are worsening the burden on renters

While HPI has increased nationwide since 2012, real median household incomes have grown only very modestly in that time period. Low- and moderate-income households struggle the most with these rising housing costs.  

Houston is considered one of America’s most affordable cities, yet the most recent data show that median monthly owner costs across the three-county area are actually higher than the national and state average.

In 2017, the median monthly owner costs in Fort Bend County were $2,014 for homeowners with a mortgage and $791 for homeowners without a mortgage, an 11% decline from 2010. The median monthly housing costs in Montgomery County decreased by 6% between 2010 and 2017. The median monthly housing cost in Harris County was $1,551 for homeowners with a mortgage and $542 for homeowners without a mortgage. Harris County’s figures are more similar to those of the nation and the state, although still higher. These median monthly costs on housing have stayed largely steady since 2010. 

Note: Median monthly owner costs refers to the total sum of payments made for mortgages, real estate taxes, utilities, mobile home costs and condominium fees.2

$500 more a month in monthly mortgage

Fort Bend County homeowners with a mortgage are paying over $2,000 a month on housing; about $500 more than the national average.

While rent is still less expensive than the average monthly mortgage payment, we see a trend with rents in the three-county area higher than the nation and state and increasing. From 2010-2017, median gross rent increased from $855 to $1,012 in the U.S. and from $801 to $987 in Texas. Among the three counties, Fort Bend has the highest median gross rent, growing from $1,085 in 2010 to $1,344 in 2017, up by 24%. For the same time period, median gross rent in Montgomery County rose by 38% and median gross rent in Harris County increased from $834 to $1,011, up by 21% since 2010. The median gross rents climbed faster in both Fort Bend and Montgomery counties than in Harris county, the rest of Texas, and the nation. 

Housing cost burdens for homeowners 

Housing-cost burden is defined as the situation in which a household spends 30% or more of income on housing costs, and severe housing-cost burden is defined as 50% or more of income spent on housing costs.3 These thresholds, established in the 1980s by the federal government, remain as a primary rule of thumb to indicate that housing is considered affordable for a household if costs fall below 30% of the household income. 

In the Houston three-county area, 21% of homeowners are housing-cost burdened, compared to 20% statewide and 22% nationally. Among the three counties, 22% of homeowners in Harris County are housing-cost burdened, the same as Fort Bend County and slightly higher than Montgomery County. 

Furthermore, 8% of homeowners in the Houston three-county area are severely housing-cost burdened, about the same as state and national averages. Between 2010 and 2017, the total number of housing-cost burdened owner households declined. 

252,984 homeowners housing-cost burdened

Across the three-county area in 2017, including 101,177 that are severely housing-cost burdened.

Housing cost burdens for renters

More renter households are housing-cost burdened than homeowners. In 2017, 46% of renter households in the Houston three-county area were housing-cost burdened, about the same as the state and national averages. That same year, 46% of renter households in Harris County, 47% of renters in Fort Bend County, and 42% of renters in Montgomery County were housing-cost burdened. These troubling figures have remained largely unchanged since 2010. 

Furthermore, 23% of renter households in Houston were severely housing-cost burdened in 2017, compared to 21% statewide and 23% nationally. Fort Bend County had the highest percentage of severely housing-cost burdened renter households at 24%, followed by Harris County at 23% and Montgomery County at 22%. 

About 1-in-4 renter households are severely housing-cost burdened

Across the three-county area in 2017. That is equivalent to 190,133 households, increased from 159,169 in 2010.

Location affordability

There is more to housing affordability than how much mortgage or rent you pay monthly. The Location Affordability Index estimates the percentage of a household’s income that will be spent on housing and transportation costs in a given location, which can help people make better-informed decisions about where to live and work.4 Here we show the cost burden of the combined expenses in each county. 

On average, Harris County residents spent $1,318 monthly on housing costs, compared to $1,769 in Fort Bend County and $1,449 in Montgomery County.

In addition to the housing costs, Harris County residents spent $12,529 annually on transportation costs, compared to $14,382 for Fort Bend County residents and $14,271 for Montgomery County. In 2015, Fort Bend County residents spent approximately 60% of household income on combined housing and transportation costs, compared to 52% of household income for residents in Montgomery County and 47% of household income for residents in Harris County.4

“In general, Harris County residents spend a higher share of household income on housing and transportation expenses than those living in Cook County, IL and Dallas County, TX.”

Subsidized housing

Some low-income households are able to access rental assistance programs to afford safe and adequate housing. Subsidized rental housing assistance programs include subsidized housing, locally run public housing units, federal Housing Choice Vouchers (HCV), federal Low-Income Housing Tax Credit (LIHTC) units, and a plethora of other smaller HUD development programs.5 Formal subsidized units are funded and distributed by government entities and require residents to meet specific income eligibility requirements. It is aimed towards alleviated housing cost burdens for low- to moderate-income households.

In 2017, there were 41,473 subsidized units available across the three counties, 91% of which were located in Harris County. And 96% of those subsidized units were occupied, higher than the state average (92%) and the national average (90%). Altogether, those units serve 94,980 low-income residents. Between 2010 and 2017, the number of subsidized housing units in the Houston three-county area virtually didn’t change, while the number of subsidized housing units decreased nationally by 1.5% but increased by 3% in Texas. 

Low-Income Housing Tax Credits (LIHTCs) are among the most important source for creating affordable housing in the country. Created by the Tax Reform Act of 1986, the LIHTC program gives State and local LIHTC-allocating agencies the equivalent of nearly $8 billion in annual budget authority to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households.6

In 2017, there were 19 LIHTC projects and 1,567 LIHTC units in Fort Bend County, 31 projects and 2,378 LIHTC units in Montgomery County, and 315 projects and more than 40,000 units in Harris County.

Housing Choice Vouchers (HCVs) are issued to low-income families, the elderly, and the disabled to make housing more affordable.7 Unlike other subsidized housing programs, people are able to choose any housing that meets the requirements of the program and are not limited to units located in subsidized housing projects. Namely, this requires the cooperation of the landlord to rent to this low-income family and receive payment from a government agency.8 

The program is run by a network of 2,150 state and local housing agencies, providing vouchers to nearly 2.5 million low-income families. From 2010 to 2017, the number of HCV participants in Houston grew by 7%, compared to 14% statewide and 11% nationally. The number of vouchers available is capped by the Housing and Urban Development Department, however, the growth rate does not account for demand. Each agency has a cap on the number of vouchers it is authorized to administer. There are huge waiting lists for vouchers in Houston and Harris County. Among the three counties, the number of participants increased by 8% in Harris County and 6% in Montgomery County. In Fort Bend County, however, the number of HCV holders actually dropped by 8% from 2010 to 2017.

Half the growth in low-income families accessing housing choice vouchers

Across the three-county area (7%) compared to the nation (11%) since 2010, with only 3% of renter households access vouchers in 2017.

A lower percentage of households in Houston had access housing choice vouchers than either the state or the nation. In the Houston three-county area just 3% of renter households were housing voucher holders, compared to 4.5% statewide and 5.7% nationwide. At 3.2%, Harris County had the highest percentage of housing choice voucher participants in 2017, compared to 2.5% in Fort Bend County and 0.7% in Montgomery County. 

Resources

References:

  1. Federal Housing Finance Agency, “House Price Index.
  2. Fact Finder, “Selected Monthly Owner Costs,” U.S. Census Bureau.
  3. Schwartz, Mary, and Ellen Wilson. “Who can afford to live in a home?: A look at data from the 2006 American Community Survey.” U.S. Census Bureau (2008): 1-13.
  4. U.S. Department of Housing and Urban Development. “Location Affordability Index v.3.” Office of Policy Development and Research and Enterprise Geospatial Information System, 2019. Web.
  5. U.S. Department of Housing and Urban Development, “Rental Assistance.”
  6. U.S. Department of Housing and Urban Development, “Low-Income Housing Tax Credits,” last modified May 24, 2019.
  7. U.S. Department of Housing and Urban Development, “Housing Choice Vouchers Fact Sheet.”