Rental Cost Burdens in Major US Cities

Housing affordability is, and probably always will be, a hot topic. There are a number of ways to measure affordability but one of the most popular is by measuring “rental burden”. This measure, estimated yearly by the US Census’s American Community Survey, looks at gross rent as a percentage of renting households’ income over the last 12 months.

With a rule of thumb that no more than 30% of your income should go to housing expenses, there are two categories of cost burden:

  • Moderately-cost burdened households spend between 30% and 49.9% of their income on rent.
  • Severely-cost burdened households spend over 50% of their income on rent.

I decided to look at rent burdens in 2015 (the latest year with data) across the 10 most populous US cities, plus my hometown of Washington, DC and famously expensive San Francisco.

What does rent burden look like in these cities?

  • Of the cities reviewed, the city with the lowest proportion of rental cost burdened households was San Francisco (37%)!!! This number surely comes as a surprise to many however, if we consider a few characteristics of SF, this makes more sense. Chiefly, many lower income residents (more likely to be cost burdened) were priced out a while ago, SF has a high number of rent controlled properties, and although SF is famously expensive to rent in it also has a very high average income.
  • The next lowest cost burdens were in Washington, DC (44%) and in San Antonio, TX and Dallas, TX (each with 45%). In DC, despite high living costs, average incomes are also high. Conversely, in the Texan cities, average incomes are significantly lower but so are housing costs.
  • Over half of renting households in New York, San Jose, Philadelphia, San Diego, and Los Angeles are at least moderately burdened. A whopping 58% of renting households in Los Angeles pay at least 30% of their income in rent.

2015 rent burden by city Continue reading

Tax Increment Financing: A Quick Primer

Cities seeking to spur development in underinvested areas have a number of tools at their disposal to entice developers. These tools include zoning changes, density bonuses, improved infrastructure, tax-related incentives, and more. All carry their own benefits, risks, and drawbacks, but within the broad tax category is a particularly interesting approach called tax increment financing (TIF).

How does it operate?

TIF has been succinctly defined as “a targeted development finance tool that captures the future value of an improved property to pay for the current costs of those improvements.” It does this by:

  1. Creating a TIF district – a TIF district (or authority) is created composed of the property/properties to be developed as well as surrounding lots
  2. Freezing assessed value within the TIF district – the assessed taxable value of property within the district is locked or frozen at pre-development level. This base tax level will continue to flow to the local or state tax authority for the remainder of the district’s life (e.g. 20 years).
  3. TIFDiverting additional value to the TIF – any additional taxable value that the district enjoys during the term of the TIF district is diverted to that authority.
  4. Paying for improvement through the TIF – that new revenue is used to fund improvements within the district, including those the district (or another authority) may have paid for at the start (outright or through a bond) to catalyze the growth.
  5. Benefiting the state/city budget after TIF term ends – After the TIF district concludes, the full taxable value of the property within the district can be taxed by the traditional state/local body.

What can TIF money be used for?

TIF funds are used to finance activities or pay off debt for costs related to “public infrastructure, land acquisition, demolition, utilities, planning, and more. TIF funds have also been used to help support community amenities such as parks, recreational facilities, schools, and network infrastructure.” (source) Continue reading