Corbin Jones is a dual architecture and real estate masters student at the University of Washington researching housing affordability in Seattle and, specifically, the Central District.
The conversation surrounding Seattle’s explosive growth has no doubt been focused on the influx of tech industry workers into the region and the effects of this in-migration on affordability and equity. Hundreds of articles, reports, blog posts, and opinion pieces have been written about who or what is responsible for the decrease in housing affordability, and what can be done to mitigate this reality. When you look through the conversations, both in cahoots and contention, one thing is clear: people who work certain jobs and make a certain income will not be able to affordably live in Seattle or any of its neighborhoods adjacent to downtown, including the Central District.
To be specific about who exactly will be priced out of the city, I examine data from the U.S. Bureau of Labor Statistics, U.S. Department of Commerce, and the U.S Census Bureau to determine which occupations are overpaying in rent. The intent is to show that affordability is linked to wages, and the majority of the jobs in the city, filled by people we know personally who might be close friends or family, do not get paid enough to allow for affordable living in many of Seattle’s neighborhoods.
I will cover the definition of “affordability,” trends in housing across the US, and income statistics in Seattle as they relate to housing expenditure.
When people speak about “affordability” it may not be clear what metric they are using to determine this claim. Affordability as defined in this post will be based on the U.S. Bureau of Labor Statistics USA average annual housing expenditure as a total percentage of annual income. For 2014 the average household expenditure was 33.60%. This is the benchmark for affordability. When a household is paying more than 33.6% on housing expenditures, they are overpaying.
Like most cities across the nation, more people in Seattle are living in rental housing since the sub-prime mortgage crisis stifled the economy and sapped mortgage lending. Homeownership rates are at their lowest point in more than 20 years settling at 64% at the end of the fourth quarter 2014 (US Census). Homeownership has many benefits that help to mitigate the net loss that is housing expenditure, primarily the fact that each payment is essentially a form of forced savings. When more people are renting and less people are buying homes, more people are susceptible to the rising costs associated with a housing bubble. Seattle’s home ownership rate is 46.23%.
Housing affordability starts with income. The graphic above shows average household income in Seattle and samples a region of Seattle’s Central District. When wages remain stagnant as rents rise, people working certain occupations are left with little or no money to spend on other goods and services. They move to make room for people who can afford to live in environments with inflated rent. There is no doubt that the number of high paying jobs in Seattle is growing, and when high-paying jobs increase, so do the support jobs that accompany them. Based on the data collected by the U.S. government, let’s examine which occupations are being priced out of Seattle:
This chart takes data from the U.S. Bureau of Labor Statistics, on total employment by occupation in the Seattle Metropolitan Statistical Area (MSA), to determine what people working in the regions most common jobs should be spending monthly on their housing expenditure. Average housing expenditure is 33.6% of the occupations annual mean wage. In the United States, a metropolitan statistical area (MSA) is a geographical region with a relatively high population density at its core and close economic ties throughout the area (Wikipedia). Employment RSE is relative standard error. Location Quotient is the degree in which these jobs bring in money from outside the local economy, with a higher number indicating a net export of a particular service. Jobs highlighted in orange are overpaying in rent according to Q4 2014 Seattle’s average rent for the Central District: $1,681
In the Central District, cooks, personal care aides, cashiers, and retail salespeople are overpaying in rent by $1,000 or more. According to the Bureau of Labor Statistics, people working just these types of jobs account for nearly 10% of the jobs per 1,000 within the Seattle MSA. The key finding here is that a large percentage of people working certain occupations are not getting paid enough to cover the average rent in Seattle, overpaying in monthly housing expenditure, and as a result are unable to do things(spend money) that they otherwise would. The next time you go buy something at the mall, a local store, or go eat at a restaurant, keep in mind that the person helping you spend your money is “living to work” in Seattle not “working to live”.
By looking at housing affordability from the perspective of income generation through wages or occupational salaries, we can get an idea of who is losing during this time of economic growth. While I am not suggesting any solution or fix in this post, I do think it’s important to build a specific profile of the people who are being priced out and ask ourselves what this means for the future of our communities.
Thank you for this information. I live in the CD and make just over $15/hr. My roommates make similar wages. I’ve noticed a lot of families being pushed out in the neighborhood and younger families or couples without kids moving in. I don’t know if there is a solution since so many highly paid individuals are moving to our city, but I do think an income tax on the rich and a lower sales tax in general could help those of us living paycheck to paycheck.
How would taxing the “Rich” help with your housing costs. Making someone less wealthy does not help you one bit with your situation. I agree that Seattle has a housing problem, but we shouldn’t play the politics of envy to solve it. Mainly because it doesn’t work.
Really? You think the desire for a progressive state income tax is based on “envy”… And you seriously are assuming that any money raised through such a tax is just going to be useless – maybe burned in some little anti-capitalist ritual rather than go toward useful infrastructure or social services – or even – as the original poster suggests – just to offset the sales tax in one of the nation’s most regressively taxed states? Please do everyone a favor and stretch that little mind and bubble of yours…
I don’t desire a progressive state income tax based on envy, but rather because I see and experience the ever growing income and wealth inequalities as a drag on the opportunity and entrepreneurship of others. Particularly as renters are precariously susceptible to the whims of the Seattle housing bubble that people with lots of money and little risk keep fueling.
If you’re pro-capitalism and innovation – as I am – then you might be a little more critical of your own assumptions.
http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html#.VUwlNI5Viko
Thank you, kevin. Beyond rent and insurance, my main expense is groceries (since as of recently, thanks to an increase in hours, I just barely don’t qualify for EBT.) With such a high sales tax, food becomes an even bigger financial burden. If we had a lower sales tax (or no sales tax at all–hey Oregon!) then I would spend a significantly less amount of money each month. Where would we get money for all of our social services? An income tax! I suspect we have a lot of high incomes in the area thanks to the techies. If you’re making six figures and not giving back to your community, you should check your priorities.
Also, I’m a big fan of that article. I’m willing to put away my pitchfork if we level the playing field a little bit more. I’m fine with some people having a ton of money if that’s what floats their yacht, but how about we work toward making everybody having enough money first?
Where are you shopping? I don’t pay sales tax on groceries.
Housing expenditure as a percentage of income compared to the national average may misrepresent Seattle. The national average includes rural and suburban environments, where the cost of housing is far lower but the cost of commuting and the availability of amenities is worse. Given that city-dwellers spend more income on housing, it may be best to compare Seattle to other cities. We’re doing a lot better than NYC: http://nypost.com/2015/03/03/new-yorkers-spend-nearly-60-of-income-on-rent-study/
Furthermore, if you apply this article’s analytic technique to country as a whole, of course a large number of people pay a greater percentage of their income than the mean. It’s an average! Given the expectation that many people will pay more than the average, it’s no surprise that people with lower incomes pay a greater percentage on basic costs of life, as there is a minimum cost.
We need to see how these number have changed year to year within our city to see how bad things actually are, and whose lives are most affected. I don’t find this snapshot in time very helpful.
I’m curious why the annual salary amount is based on 1,700hrs? I’ve always seen 2,080 as 1.0 FTE. 1,700 hours is about 0.82 FTE.
I was wondering this too.
2080 assumes an employee working 52 weeks a year, 40 hrs a week, which isn’t really consistent with how many hours people actually work (sick days, holidays, etc.) and isn’t realistic for employees that are working hourly rather than earning an annual salary.
I assume he selected 1700 hrs because that represents the average annual hours worked for Americans.:
http://www.businessinsider.com/average-annual-hours-worked-for-americans-vs-the-rest-of-the-world-2013-8
there would need to be some agreed upon average regarding # of hours paid for, as many (but definitely NOT all, and perhaps not the majority of people) have holidays, vacations and sick time paid for even though they aren’t working at those times.
That said, I agree that a state income tax is a far more fair way to distribute the tax burden than our excessively high sales tax. My biggest concern is that, even if we could finally get a progressive income tax passed in Seattle, the sales tax would not actually go down. That would benefit no one.