House Hunters

A look at housing affordability in the New Orleans market

Housing affordability is a growing and increasingly critical challenge in many communities. The issue is complex, of course, but the fundamental problem is relatively straightforward: Wages have generally not kept pace with housing costs. This leaves many workers hard-pressed to find housing within their budgets, and it makes the proposition of homeownership—especially for first-time buyers—more difficult. Further, it creates or exacerbates a huge opportunity cost for local communities, since cost-burdened residents have less disposable income to spend, save or invest.

To get a sense of how the New Orleans metro area has changed over the last several years and how we compare to other regions, I analyzed data from the U.S. Census Bureau’s American Community Survey from 2009 and 2014. The data sets include, among many other variables, information about housing units, tenure and costs. From this analysis flow three clear conclusions.

First, the percentage of housing units occupied by renters has increased markedly.

In 2009, 48.9 percent of occupied housing units housed renters; by 2014 this figure had risen to 54.1 percent (an increase of 5.2 percentage points), which ranks among the top 3 percent of all U.S. counties. By comparison, the rate of renter occupancy in the metro area rose by 3.4 percentage points, and the national rate of renter occupancy rose 4.1 percentage points. Even amidst a nationwide trend away from homeownership, New Orleans stands out as an increasingly rental-driven market.

Secondly, our area’s housing costs are high relative to residents’ earnings. In 2014, over a third of Orleans Parish homeowners spent over 35 percent over their household income on housing costs, which despite declining since 2009, still ranks among the top 3 percent of all counties nationwide. Judging by this same measure, housing in the New Orleans metro area is approximately as affordable as in the Seattle, Portland, Charleston and Boston metro areas, none of which are regions generally associated with modest costs of living.

Renters remain even more heavily encumbered. The New Orleans metro area ranks 11th in the percentage of renters—48.0—spending more than 35 percent of their income on housing costs. In Orleans Parish alone, 53.3 percent of renters exceed this threshold, putting the city among the top 5 percent of counties nationwide.

Third, however, our region’s vacancy rate has remained relatively high. Overall, the New Orleans metro area has the 16th-highest vacancy rate in the country. In 2014, 14.4 percent of housing units were vacant, down slightly from 14.9 percent in 2009. Our vacancy rate is comparable to those of the Phoenix, Jacksonville and Riverside, California, metro areas—regions hit especially hard during the housing crisis. The vacancy rate in Orleans Parish was 20.6 percent in 2014, down from 23.5 percent but still among the top 10 percent of all counties nationwide. Importantly, the population of Orleans Parish was once 640,000, meaning that the city has a footprint and a housing stock capable of supporting 60 percent more residents than it currently has.

The problem of housing affordability has no easy or expedient solution. Even with combinations of tax credits, subsidies and development incentives long offered to investors and property owners, the challenge has persisted and, in some ways, has grown worse. The good news, however, is that for the foreseeable future, there will be an ample housing supply in the New Orleans area. It is critical that through market ingenuity, public policy,or, more likely, a combination of both, some portion of this supply allow struggling residents to share in the comfort and security characteristic of a modern economic success story. 


Source: U.S. Census Bureau’s American Community Survey
 



Robert Edgecombe is an urban planner and consultant at GCR Inc. He advises a wide range of clients on market conditions, recovery strategies, and demographic and economic trends.

 

 


Categories: Real Estate, The Magazine

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