Real Estate News

Renters in South Florida’s minority communities spend more than half their income on rent

According to a new report from Zillow, renters in predominantly black and Hispanic communities in South Florida pay more than half of their income on rent, a large percentage than renters in predominately white neighborhoods.
According to a new report from Zillow, renters in predominantly black and Hispanic communities in South Florida pay more than half of their income on rent, a large percentage than renters in predominately white neighborhoods.

Three reports released Thursday confirm what we already knew: Living in paradise isn’t cheap.

While Miami rents chew up 36 percent of the median income, according to a Forbes report earlier this year, the situation is even more grim in predominantly black and Hispanic communities in South Florida, according a study released Thursday by real-estate database Zillow. Renters in those neighborhoods are spending more than half of their income on housing compared with renters in mostly white neighborhoods.

According to the Zillow report, renters in black and Hispanic communities spend nearly 15 percentage points more of their average income on rent than those in predominantly white neighborhoods. That is slightly less than the national average of 15.2 percentage points.

Renters in black communities spent about 58 percent of their income on rent in 2016, while renters in Hispanic communities spent about 55 percent of what they made last year to cover housing. That’s compared with the nearly 42 percent slice of their income renters in predominantly white neighborhoods allotted for rent payments.

African-American and Hispanic renters find themselves in a Catch-22 situation — while owning a home is a great way to build wealth, you need to save up some cash to be able to buy. If you’re spending close to half of your income on rent, saving up that down payment is going to be incredible difficult.

Svenja Gudell, Zillow’s chief economist

A large part of that difference is caused by income disparity, said Svenja Gudell, Zillow’s chief economist.

“The typical household in black communities in Miami earns just 52.9 percent of the typical household in white neighborhoods — for Hispanic communities, that figure is slightly better at 71.1 percent,” Gudell said in a statement. “Therefore, even though the homes in many minority communities are slightly less expensive, they eat up a larger share of the typical resident’s income.”

Overall, South Florida ranked sixth among the nation’s major metropolitan areas, with the widest margin between renters in minority neighborhoods and renters in white neighborhoods.

Boston had the highest discrepancy between the two groups at an average of about 31 percentage points, followed by New York and Northern New Jersey at nearly 25 percentage points, Philadelphia at 21.5 percentage points, San Francisco at about 20 percentage points and Chicago at 17.4 percentage points.

South Florida ranked fifth among the metro areas where renters in African-American neighborhoods paid the highest share of the income on rent. Among renters in Hispanic communities, South Floridians had the seventh-highest share of their income going to rent.

“The research sheds light on another example of inequality in the housing market,” Gudell said in a statement. “African-American and Hispanic renters find themselves in a Catch-22 situation — while owning a home is a great way to build wealth, you need to save up some cash to be able to buy. If you’re spending close to half of your income on rent, saving up that down payment is going to be incredibly difficult.”

Overall, South Florida renters are spending a larger percentage of their income on housing than the national average. In the U.S., renters in predominately black neighborhoods spent an average of nearly 44 percent of their income, renters in mostly Hispanic communities spent about 48 percent of their income and renters in white neighborhoods spend nearly 31 percent of their income on rent. The standard rule is to spend about 30 percent of income on housing.

Rent affordability is an issue that has been worsening since 2011. In the past five years, the share of household income used to pay for monthly rent in black and Hispanic neighborhoods has increased by four and seven percentage points, respectively, according to Zillow. Meanwhile, the share of income in white communities used toward rent payments increased by three percentage points.

Renters in black communities spent about 58 percent of their income on rent in 2016, compared with 55 percent in Hispanic communities and nearly 42 percent in predominantly white neighborhoods.

The good news: Those who are able to save enough for a down payment and buy a home have mortgage payments that are much more manageable and less disparate among racial groups. In black communities, mortgage payments are about 13.6 percent of median household income, compared with nearly 23 percent in Hispanic communities and about 15 percent in white communities, according to Zillow.

In South Florida, the lack of affordable housing has made the prospect of buying a home unattainable for some locals. The region ranks eighth-worst in the nation for first-time home buyers because of the gap between incomes and home prices, a Bloomberg study found.

Costs rising

A separate report released Thursday by the nonprofit Urban Institute also underscored rising housing costs for Miami’s low- and middle-income households, who make between 50 and 120 percent of the area median income, or $24,050 to $57,720 per year. The cause, according to the report: rapid population growth and an influx of wealthier residents.

Between 2000 and 2015, the percentage of households spending more than 30 percent of income on rent grew from 27 percent to about 75 percent. Areas heavily affected included those that have changed dramatically: downtown, Edgewater and Wynwood.

Between 2000 and 2015, the percentage of households spending more than 30 percent of income on rent grew from 27 percent to about 75 percent. Areas heavily affected included those that have changed dramatically: downtown, Edgewater and Wynwood.

The report noted “a possible need for greater public awareness about why preserving and creating afford housing for LMI households is important for the community, as well as benefits of other policy solutions, such as community land banking. To secure affordable housing and to meet developers’ needs, the county and city should enhance developer-based incentives in a manner that quality, affordable housing is created and retained.”

The report also noted obstacles of a slow permitting process for construction and development, and the need for public transportation.

Bad, but not worst

And according to a new report by Attom Data Solutions, a typical South Florida homebuyer spends 39 percent of their income on housing.

It could be worse: in 97 U.S. counties, a monthly mortgage payment costs 43 percent of the average income. In Brooklyn, the cost is a whopping 121.4 percent, higher even than in Manhattan (100.5 percent) or Maui, Hawaii (100.2 percent.)

Looking for a bargain? Try Milwaukee, where costs drop to 14.8 percent.

Miami Herald Business Editor Jane Wooldridge contributed to this report.

Chabeli Herrera: 305-376-3730, @ChabeliH

 
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