Housing Affordability in the Greater Kansas City Area

Transcription

1 Housing Affordability in the Greater Kansas City Area Kirk McClure, Ph.D. Professor Department of Urban Planning University of Kansas August 12, 2011

2 Executive Summary Housing affordability is generally assessed by the percentage of income that a household must spend to own or rent a home. Households, especially low-income households, who spend more than 30 percent of income on total housing costs, are deemed to suffer from a high housing cost burden. The proportion of households with a high housing cost is a measure of a market s housing affordability. In the metropolitan area, 24 percent of owners and 44 percent of renters suffer high housing cost burden, defined as paying more than 30 percent of income on housing costs. Among the poor, it is 78 percent of owners and 87 percent of renters. Housing markets, like all markets, reflect the interaction of demand and supply. Demand for housing is a direct function of the income of each household in the market. The supply is a response to this demand. Demand: Population grew by 7.1 percent in the Kansas City metropolitan area from 2000 to 2009, adding 85,000 households. Household incomes in the area are generally a little higher than the national level with a median of$55,400 compared to $51,400. However, the median income in the area grew less than did the nation s. Supply: The housing stock in the Kansas City metropolitan area grew by 16.1 percent from 2000 to This was considerably faster than household growth. Adding 119,000 housing units, the housing stock built a surplus of 34,000 units. This surplus means that the Kansas City area added 3,800 units per year more than were needed. Supply: The overbuilding added greatly to the stock of vacant housing units. In the Kansas City area the stock of vacant units went from 46,000 empty units in 2000 to almost 81,000 in The price of housing in any market responds to adjustments in supply and demand, but prices do not always rise and fall with income levels. When prices rise faster than incomes, affordability problems worsen. Existing owners gain wealth, but first-time homebuyers and renters confront greater barriers to consuming housing without spending a burdensome share of income on that housing. Prices: The run-up of housing values and rents during the first decade of the new century was dramatic in the Kansas City area as elsewhere. Home values rose over twice as fast as the incomes of homeowners. Rents rose four times as fast as the incomes of renters. Price-Income Matchup for Owners: The poorer parts of the metropolitan area have surpluses among the lowest priced homes. For example, Wyandotte County has a surplus. Jackson County is more balanced. Johnson and Platte counties both have large shortages among homes priced below $100,000. Price-Income Matchup for Renters: In the Kansas City metropolitan area there is a shortage of about 32,000 units at rents below $500, but there is a surplus of over 65,000 units in the $500 to $900 range. 1

3 The federal government funds several programs to assist renter households with low- or moderateincome. The programs include public housing, Housing Choice Vouchers, and units funded by the Low- Income Housing Tax credit program. In the Kansas City area, about 24 percent of all renter households are subsidized The spatial distribution of the assisted housing is not evenly distributed. Rather, the assisted units are heavily concentrated in Jackson and Wyandotte counties. Over 80 percent of the area s public housing is found in these two counties. 2

4 Affordability Affordability: Definition Attempts to assess housing affordability have taken many different approaches, each of them correct in their own way. The most commonly accepted approach considers a housing market affordable if low- or moderate-income households can find good quality housing without spending more than 30 percent of gross income on housing costs. This definition is workable because it relies on commonly available Census data. It is possible to identify households who suffer from a high housing cost burden, which is spending more than 30 percent of income and whose incomes are accepted as low or moderate. The difficulty with this approach is that counting the households with a high housing cost burden does not identify the extent to which the problem is a function of households having too little income to afford good quality housing and the extent to which the housing market fails to provide adequate quantities of housing, of good quality at prices that can be afforded without hardship. Careful investigation of the matchup between households in each income category with housing in each corresponding price category can assist in identification of the extent to which the market has affordability problems due to low incomes, due to high prices or both. Affordability: Extent of the problem nationally and in Kansas City In the United States, about 30 percent of all homeowners and about 50 percent of all renters suffer from a high housing cost burden. The problem is much greater among poor households. For households with incomes below $20,000 in 2009, 71 percent of all owners and 87 percent of all renters suffer from high housing cost burden. (Note that in 2009, poverty was defined as a 3-person household with income below $18,310 and a 4-person household with income below $22,050. Thus, an annual income of $20,000 in 2009 roughly corresponds to the poverty threshold. See: Interestingly, compared to the nation, the greater Kansas City metropolitan area has a lower incidence of high housing cost burden across the population as a whole but the same or higher incidence among the households with incomes below $20,000. In the metropolitan area, 24 percent of owners and 44 percent of renters suffer high housing cost burden. Among the poor, it is 78 percent of owners and 87 percent of renters. (See Table 1.) The problems are greater in the higher cost markets of Johnson and Platte Counties. These counties shares of households with high housing cost burden run 2 to 3 percentage points higher than the metropolitan average. The problems are similarly less prevalent in the more rural markets counties. The lower overall incidence of high housing cost burden suggests that the incidence of low income plays a significant role in the housing affordability problems of Kansas City. With the problem less severe overall, but greater among the poor, the housing market must be performing relatively well in general, but many households are too poor to participate in the market at prices offered in the market. 3

5 Table 1. Measures of Housing Market Conditions for the Kansas City Area Housing Affordability: Households Paying More than 30 Percent of Income on Housing Location Households paying 30+% of Income on Housing Owner Households Renter Households Percent Percent Percent Percent All Owner Income All Renter Income Households < $20,000 Households < $20, Nation United States Metrpolitan Area Kansas City, MO-KS Counties Cass County, Missouri Clay County, Missouri Clinton County, Missouri Jackson County, Missouri Johnson County, Kansas Lafayette County, Missouri Leavenworth County, Kansas Miami County, Kansas Platte County, Missouri Ray County, Missouri Wyandotte County, Kansas Cities over 20,000 population in 2009 Belton, Missouri Blue Springs, Missouri Gladstone, Missouri Grandview, Missouri Independence, Missouri Kansas City, Kansas Kansas City, Missouri Leavenworth, Kansas Leawood, Kansas Lee's Summit, Missouri Lenexa, Kansas Liberty, Missouri Olathe, Kansas Overland Park, Kansas Prairie Village, Kansas Raytown, Missouri Shawnee, Kansas

6 Sources of the Affordability Problem: Supply and Demand Conditions Further analysis uncovers the sources of the housing affordability problems in the Kansas City area. Prices seem to be below average while incomes are generally about average making this an affordable place to find a home. But many households suffer from high housing cost burden, and it is important to understand the role that the housing market plays in this problem. Demand for housing Demand: Population growth Changes in the demand for housing are largely a function of the changes in the population. As population grows, more housing is needed. Where population declines, surplus housing is found and the stock needs to contract. Nationwide, the population grew by 7.1 percent from 2000 to The Kansas City metropolitan area grew much faster at 13.4 percent creating a need for more housing in most parts of the metropolitan area. (See Table 2.) Growth was not balanced across the metropolitan area: Jackson County grew by 5.3 percent adding about 35,000 people, Johnson County grew by 16.4 percent adding about 74,000 people, Wyandotte County lost population at -2.6 percent losing about 4,000 people. Demand: Household Formation Rate The rate of household formation is another measure of growth in the demand for housing. A household is a person or persons who occupy a housing unit, thus the availability and pricing of housing influences the pace at which the population organizes itself into households. Where the stock is soft (ample units exist at low prices) the population can form more and smaller households. Where the stock is tight (units are scarce and carry high prices) the reverse is true. Nationwide, households grew by 6.8 percent, a rate that was a little slower than the rate of population growth, which may reflect increasing housing affordability problems causing people to form fewer and larger households to occupy housing that is increasingly scarce and priced higher. (See Table 3.) The Kansas City metropolitan grew much faster at 12.2 percent, but as with the nation, the growth of households lagged behind the growth of population. Johnson County households grew 15.7 percent (27,000 households), lagging population growth, Jackson County grew only 1.2 percent (3,000 households), well behind population growth, Wyandotte County declined 1.8 percent (1,000 households), a less rapid decline than the population decline probably reflecting the surplus stock of housing available at low prices. 5

7 At the level of individual cities, Kansas City, Missouri households grew by 5.7 percent, but population grew by 7.5 percent. When this pattern is found in housing markets, it is often a response to high priced housing or a high incidence of poor households who must form larger households to afford the housing even if it is reasonably priced. Overland Park, Kansas households grew 15.1 percent, but population grew 14.4 percent. This pattern usually reflects a housing stock with a surplus of units. Kansas City, Kansas households contracted by 2.2 percent, but the population decreased at an even faster 3.2 percent rate. This pattern usually indicates a housing stock with a contracting supply of homes. Independence, Missouri households held to a stable count while population was growing. This pattern can indicate a tight, or at least tightening, housing market. Olathe, Kansas is balanced with 25 percent growth in both population and households. Household formation rates differ between renters and homeowners. Nationwide, from 2000 to 2009, owner households grew at 7.9 percent, while renter households grew less rapidly at 4.6 percent. At these rates, owner household grew faster than population growth while renters lagged. For owner households to grow faster than population means that the stock of units for owner occupancy must be growing rapidly to accommodate this growth. The Kansas City metropolitan area followed the same pattern. Owner households grew 14.6 percent, while renters grew by less than one-half that rate at 7.1 percent. The largest counties followed a variety of patterns. Johnson County experienced virtually identical growth in renter and owner households at 15.6 percent, slightly lagging population growth of 16.4 percent. This pattern suggests that Johnson County is an attractive location given its strong growth but that the housing market is not fully adjusting to the influx of population. Jackson County experienced growth among owners (4.0 percent) and decline among renters (-3.4 percent). These opposing trends occurred while the population grew at a 5.3 percent pace. This pattern suggests a ready supply of homes for owner-occupancy and a less available or less attractive supply of rental dwellings. Wyandotte County saw renter households decline faster than population while owner household declined less rapidly. The largest cities in the metropolitan area also experienced varied patterns of growth and decline across tenure. Kansas City, Missouri saw owner households grow quickly while renters lagged. Overland Park, Olathe and Shawnee as well as the other Johnson County cities all saw owners grow at much faster rates than renters. Kansas City, Kansas experienced decline in both tenure groups. 6

8 Demand: Incomes Increases in home values and rents are driven by many things. Among the drivers are the incomes of the consumers. As income grows, stabilizes and declines, so too does the demand for housing. A household needs a housing unit, but the household can only purchase a home within its income constraint. Renters, who typically have lower incomes, usually spend about 30 percent of income on housing. Owner-occupants, who typically have higher incomes, spend a smaller share, about 25 percent of income if they have a mortgage, and even less (13 percent) if there is no mortgage. If income is growing faster than inflation, then households will have more remaining real income to spend on housing. If income is not growing faster than inflation, then they will have less for housing or they must allocate more income toward housing. The Consumer Price Index (CPI) is the most commonly accepted measure of inflation. For the mid-west it rose from in 2000 to in 2009, a rise of 24.6 percent (Source: U.S. Bureau of Labor Statistics). Nationwide median household income rose slightly less than inflation. Incomes grew 22.9 percent. (See Table 4.) Owners income rose a little faster than inflation, increasing 25.4 percent. For renters, their income rose much less than inflation at 14.2 percent, falling behind inflation by over 10 percentage points. (See Table 5.) Household incomes in the Kansas City metropolitan area are generally a little higher than found nationwide (median household income of $55,400 compared to $51,400). However, they grew less from 2000 to All households averaged a 20.3 percent increase, which is about 4.3 percentage points below inflation indicating a loss in the typical household s standard of living. Even homeowners saw a small decrease in real income with a 23.7 percent growth, 1.7 percent below the growth of inflation. Renters in the Kansas City area, who like all renters have lower median household income than owners, experienced a significant decline in real income. Median renter income in Kansas City grew only 7.3 percent, lagging inflation by more than 17 percentage points. This suggests a significant loss in the standard of living for this population, and unless rents fell in a similar fashion, renter households are confronting a greater housing cost hardship due to reduced real income. At the county level: Johnson, Leavenworth and Miami counties all experienced real growth in incomes for homeowners while renters lost ground. Wyandotte County saw reduced real median household income for both owners and renters. On the Missouri side, the counties mirrored the metropolitan area as a whole. Owners saw income grow close to or a little less than inflation for owners, but renters lost ground. The exception on the Missouri side is Ray County which saw a decline in real median household income for both renters and owners. 7

9 The larger cities in the metropolitan area followed a variety of trends. The typical Kansas City, Missouri homeowner saw income rise a little faster than inflation while renters fell well behind. Overland Park owners saw income rise slightly less than inflation but on a very high base. Among the 17 cities with population above 20,000, growth in homeowner income was widely dispersed. Eleven cities saw owners income rising less than inflation. Renter income was not dispersed. In only one city (Prairie Village) did renters income rise more than inflation. 8

10 Table 2. Measures of Housing Market Conditions for the Kansas City Area Demand for Housing: Growth in Population and Households Location Population Households All Persons All Households Percent Percent Change Change Nation United States 301,461, ,421, ,611, ,480, Metrpolitan Area Kansas City, MO-KS 2,013,797 1,776, , , Counties Cass County, Missouri 97,203 82, ,957 30, Clay County, Missouri 217, , ,431 72, Clinton County, Missouri 20,810 18, ,165 7, Jackson County, Missouri 689, , , , Johnson County, Kansas 525, , , , Lafayette County, Missouri 32,741 32, ,337 12, Leavenworth County, Kansas 73,504 68, ,426 23, Miami County, Kansas 30,511 28, ,543 10, Platte County, Missouri 87,461 73, ,684 29, Ray County, Missouri 23,507 23, ,295 8, Wyandotte County, Kansas 153, , ,640 59, Cities over 20,000 population in 2009 Belton, Missouri 24,473 21, ,235 7, Blue Springs, Missouri 54,654 47, ,305 17, Gladstone, Missouri 28,255 26, ,338 11, Grandview, Missouri 23,628 24, ,689 9, Independence, Missouri 120, , ,298 47, Kansas City, Kansas 142, , ,291 55, Kansas City, Missouri 474, , , , Leavenworth, Kansas 34,759 35, ,083 12, Leawood, Kansas 30,972 27, ,055 9, Lee's Summit, Missouri 80,792 71, ,336 26, Lenexa, Kansas 45,704 40, ,471 15, Liberty, Missouri 30,429 26, ,255 9, Olathe, Kansas 117,116 93, ,417 32, Overland Park, Kansas 170, , ,775 59, Prairie Village, Kansas 21,520 22, ,954 9, Raytown, Missouri 27,781 30, ,152 12, Shawnee, Kansas 59,828 48, ,620 18,

11 Table 3. Measures of Housing Market Conditions for the Kansas City Area Demand for Housing: Households by Tenure Location Households Households Owner Occupants Renters Percent Percent Change Change Nation United States 75,320,422 69,816, ,290,607 35,663, Metrpolitan Area Kansas City, MO-KS 540, , , , Counties Cass County, Missouri 28,497 24, ,460 6, Clay County, Missouri 62,441 51, ,990 21, Clinton County, Missouri 6,329 5, ,836 1, Jackson County, Missouri 174, , ,456 98, Johnson County, Kansas 146, , ,895 48, Lafayette County, Missouri 9,936 9, ,401 3, Leavenworth County, Kansas 17,817 15, ,609 7, Miami County, Kansas 9,235 8, ,308 2, Platte County, Missouri 23,832 19, ,852 9, Ray County, Missouri 7,379 6, ,916 1, Wyandotte County, Kansas 37,291 37, ,349 22, Cities over 20,000 population in 2009 Belton, Missouri 6,301 5, ,934 2, Blue Springs, Missouri 14,758 12, ,547 4, Gladstone, Missouri 8,012 7, ,326 3, Grandview, Missouri 5,393 5, ,296 3, Independence, Missouri 32,402 32, ,896 15, Kansas City, Kansas 34,145 34, ,146 21, Kansas City, Missouri 116, , ,360 77, Leavenworth, Kansas 6,432 6, ,651 5, Leawood, Kansas 10,345 9, Lee's Summit, Missouri 22,853 20, ,483 6, Lenexa, Kansas 11,638 9, ,833 5, Liberty, Missouri 8,519 6, ,736 2, Olathe, Kansas 30,280 23, ,137 9, Overland Park, Kansas 45,620 40, ,155 19, Prairie Village, Kansas 8,069 8, ,885 1, Raytown, Missouri 8,413 9, ,739 3, Shawnee, Kansas 16,584 13, ,036 4,

12 Table 4. Measures of Housing Market Conditions for the Kansas City Area Demand for Housing: Household Income Location Median Household Income All Households Percent Change Nation United States 51,425 41, Metrpolitan Area Kansas City, MO-KS 55,409 46, Counties Cass County, Missouri 60,628 49, Clay County, Missouri 57,797 48, Clinton County, Missouri 50,761 41, Jackson County, Missouri 46,516 39, Johnson County, Kansas 73,487 61, Lafayette County, Missouri 47,811 37, Leavenworth County, Kansas 59,515 47, Miami County, Kansas 59,888 46, Platte County, Missouri 65,383 55, Ray County, Missouri 51,556 41, Wyandotte County, Kansas 37,998 33, Cities over 20,000 population in 2009 Belton, Missouri 50,854 45, Blue Springs, Missouri 70,097 55, Gladstone, Missouri 49,939 46, Grandview, Missouri 43,598 40, Independence, Missouri 44,196 38, Kansas City, Kansas 36,973 32, Kansas City, Missouri 44,436 37, Leavenworth, Kansas 49,960 40, Leawood, Kansas 127, , Lee's Summit, Missouri 74,605 60, Lenexa, Kansas 73,244 61, Liberty, Missouri 60,684 52, Olathe, Kansas 75,807 60, Overland Park, Kansas 71,401 61, Prairie Village, Kansas 77,274 58, Raytown, Missouri 49,149 41, Shawnee, Kansas 71,940 58,

13 Table 5. Measures of Housing Market Conditions for the Kansas City Area Demand for Housing: Household Income by Tenure Location Median Household Income Median Household Income Owner Occupants Renter Occupants Percent Percent Change Change Nation United States 64,338 51, ,258 27, Metrpolitan Area Kansas City, MO-KS 69,569 56, ,583 29, Counties Cass County, Missouri 69,065 54, ,965 28, Clay County, Missouri 70,036 56, ,833 31, Clinton County, Missouri 57,882 47, ,839 24, Jackson County, Missouri 61,272 49, ,917 25, Johnson County, Kansas 90,390 72, ,887 37, Lafayette County, Missouri 55,124 44, ,413 24, Leavenworth County, Kansas 70,804 55, ,667 33, Miami County, Kansas 69,529 52, ,796 28, Platte County, Missouri 81,722 65, ,381 37, Ray County, Missouri 56,813 47, ,960 21, Wyandotte County, Kansas 48,063 41, ,288 23, Cities over 20,000 population in 2009 Belton, Missouri 59,859 50, ,696 27, Blue Springs, Missouri 77,064 62, ,613 34, Gladstone, Missouri 64,296 54, ,403 30, Grandview, Missouri 56,973 50, ,337 27, Independence, Missouri 53,423 44, ,307 27, Kansas City, Kansas 46,799 40, ,807 23, Kansas City, Missouri 60,640 48, ,297 25, Leavenworth, Kansas 63,367 46, ,369 32, Leawood, Kansas 136, , ,970 41, Lee's Summit, Missouri 86,733 71, ,756 31, Lenexa, Kansas 100,490 80, ,127 38, Liberty, Missouri 73,055 62, ,315 28, Olathe, Kansas 89,308 71, ,012 33, Overland Park, Kansas 92,350 76, ,894 41, Prairie Village, Kansas 83,466 62, ,918 42, Raytown, Missouri 56,307 47, ,051 26, Shawnee, Kansas 87,698 69, ,469 35,

14 Supply Supply is supported by demand. Growth in supply is only sustainable to the extent that there is growth in demand to support it. In a well-balanced housing market, supply does not grow faster than the growth in demand for that housing. Many of the problems in the housing market today, both nationally and in Kansas City, result from a decade of the supply growing faster than the growth in demand. Supply: Housing stock Nationally, households grew by 6.8 percent or about 7.1 million, from 2000 to During the same period, the stock of housing grew by 10.2 percent, or about 11.8 million units. Thus, the decade produced a surplus stock of about 4.7 million units. (See Table 6.) The housing stock in the Kansas City metropolitan area grew by 16.1 percent from 2000 to This was considerably faster than household growth. The metropolitan area added about 85,000 households but added 119,000 housing units, a surplus of 34,000 units or 3,800 units per year more than were needed. The overbuilding seemed to be greatest in Jackson County (16,900 units) and Johnson County (4,500 units). At the place level, the Kansas City, Missouri had the greatest level of over-building (12,800 units) followed by Kansas City, Kansas (2,700 units), Independence (2,400 units) and Overland Park (2,000 units). Although a smaller share of the stock, the overbuilding was greater within the rental stock than within the stock for owner-occupancy. (See Table 7.) Supply: Vacancy The overbuilding added greatly to the stock of vacant housing units. In the Kansas City area the stock of vacant units went from 46,000 empty units in 2000 to almost 81,000 in (See Table 8.) There is disagreement among economists as to what is a healthy vacancy rate. All agree that there needs to be some level of vacancy to provide for necessary mobility and for price testing within any market. Historically, healthy vacancy rates in the market for owner-occupied housing are seen as 1.75 to 2.0 percent. In the rental market, health vacancy has been seen as around 5 percent. In the owner-occupied market, vacancy was normal in 2000 at 2.0 percent nationally and 1.9 percent in the Kansas City metropolitan area. By 2009, vacancy had grown to 3.1 percent both in Kansas City and across the nation. This means about 8,000 empty homes in the area that are beyond what is needed. (See Table 9.) At the county level: Jackson County and Wyandotte counties have the highest vacancy rates. Jackson County, in general, and Kansas City, Missouri, in particular, added units much faster than household formation. Wyandotte County added units but lost population, adding to the stock of surplus homes. 13

15 In the renter-occupied market, vacancy was high at the beginning of the decade, but it grew worse with time. In the metropolitan area, the rental vacancy rate was 8.8 percent in 2000, but it grew to 11.9 percent by This corresponds to 12,000 more vacant units than would exist in a healthy market. At the city and county level: Counties with rental vacancy rates above 10 percent include Clinton, Jackson, Lafayette and Platte on the Missouri side plus Johnson and Leavenworth on the Kansas side. Ten of the 17 large cities in the metropolitan area have rental vacancy rates in excess of 10 percent. Supply: Age and Condition of the Housing Census data provide very weak evidence of the physical conditions of the stock of housing. The age of the housing is best indicator. If a very high percentage of the homes are very old (more than 50 years) this stock may be in poor condition. If a very high percentage of the homes are recently built (within the last 10 years) the stock will probably be in good condition. The rate of construction of housing in the Kansas City area has been high, but it has been commensurate with the rate found nationwide. About 31 percent of owner-occupied homes were built since 2000, and about 11 percent of renter-occupied housing was built since Thus, the Kansas City market has added housing rapidly, but at a pace commensurate with the pace found elsewhere. (See Table 10.) The Census Bureau does identify homes with 1, 2 or more physical or financial conditions that indicate problems. Nationally 30 percent of owner units and 48 percent of rental units have one condition, but only 1 percent of owner units and 4 percent of renter units have two or more conditions. Generally, the markets in Kansas City appear to be in better shape as they have a lower incidence of these problems. The exception is Kansas City, Kansas which is above national levels with both renter and owner housing. 14

16 Table 6. Measures of Housing Market Conditions for the Kansas City Area Supply of Housing: Housing Units Occupied or Vacant Location Housing Units Occupied or Vacant Units for Owners or Renters Growth in Units Percent net Growth in Change Households Nation United States 127,699, ,904, ,664,143 Metrpolitan Area Kansas City, MO-KS 860, , ,398 Counties Cass County, Missouri 38,448 31, Clay County, Missouri 92,476 76, ,373 Clinton County, Missouri 8,886 7, Jackson County, Missouri 308, , ,924 Johnson County, Kansas 213, , ,462 Lafayette County, Missouri 14,515 13, Leavenworth County, Kansas 27,934 24, ,178 Miami County, Kansas 12,418 10, Platte County, Missouri 37,493 30, ,185 Ray County, Missouri 10,164 9, Wyandotte County, Kansas 67,510 65, ,678 Cities over 20,000 population in 2009 Belton, Missouri 9,978 8, Blue Springs, Missouri 20,525 17, Gladstone, Missouri 13,015 11, Grandview, Missouri 9,849 10, Independence, Missouri 52,517 50, ,402 Kansas City, Kansas 62,936 61, ,699 Kansas City, Missouri 225, , ,810 Leavenworth, Kansas 13,656 12, Leawood, Kansas 11,426 10, Lee's Summit, Missouri 31,087 27, Lenexa, Kansas 18,455 16, Liberty, Missouri 11,788 9, Olathe, Kansas 42,096 33, Overland Park, Kansas 73,747 62, ,030 Prairie Village, Kansas 10,283 10, Raytown, Missouri 12,252 13, Shawnee, Kansas 23,818 19,

17 Table 7. Measures of Housing Market Conditions for the Kansas City Area Supply of Housing: Occupied Housing Units by Tenure Location Housing Units Occupied or Vacant Housing Units Occupied or Vacant For Owner Occupancy For Rental Occupancy Growth in Growth in Units Units Percent net Growth in Percent net Growth in Change Households Change Households Nation United States 77,757,231 71,240, ,013,319 41,105,645 38,339, ,138,931 Metrpolitan Area Kansas City, MO-KS 558, , , , , ,862 Counties Cass County, Missouri 29,329 24, ,240 6, Clay County, Missouri 64,104 52, ,601 22, Clinton County, Missouri 6,422 5, ,041 1, Jackson County, Missouri 181, , , , , ,122 Johnson County, Kansas 148, , ,229 62,315 52, ,732 Lafayette County, Missouri 10,093 9, ,749 3, Leavenworth County, Kansas 18,555 15, ,569 8, Miami County, Kansas 9,504 8, ,444 2, Platte County, Missouri 24,402 19, ,404 10, Ray County, Missouri 7,502 7, ,045 1, Wyandotte County, Kansas 38,773 38, ,671 24, Cities over 20,000 population in 2009 Belton, Missouri 6,503 6, ,268 2, Blue Springs, Missouri 15,170 12, ,162 4, Gladstone, Missouri 8,123 8, ,584 3, Grandview, Missouri 5,791 6, ,726 4, Independence, Missouri 33,248 32, ,892 16, Kansas City, Kansas 35,557 35, ,421 23, Kansas City, Missouri 122, , ,726 92,749 86, ,808 Leavenworth, Kansas 6,795 6, ,425 6, Leawood, Kansas 10,519 9, Lee's Summit, Missouri 23,433 20, ,923 6, Lenexa, Kansas 11,900 9, ,310 6, Liberty, Missouri 8,741 7, ,782 2, Olathe, Kansas 30,675 23, ,062 9, Overland Park, Kansas 46,609 41, ,361 20, ,463 Prairie Village, Kansas 8,121 8, ,958 1, Raytown, Missouri 8,614 9, ,163 3, Shawnee, Kansas 16,867 13, ,780 5,

18 Table 8. Measures of Housing Market Conditions for the Kansas City Area Supply of Housing: Vacant Units Location Vacant Housing Units For Rent, For Sale plus Seasonal Units 2009 Percent 2000 Percent Vacant Vacant Nation United States 15,088, ,424, Metrpolitan Area Kansas City, MO-KS 80, , Counties Cass County, Missouri 2, , Clay County, Missouri 6, , Clinton County, Missouri Jackson County, Missouri 38, , Johnson County, Kansas 11, , Lafayette County, Missouri 1, , Leavenworth County, Kansas 2, , Miami County, Kansas Platte County, Missouri 2, , Ray County, Missouri Wyandotte County, Kansas 8, , Cities over 20,000 population in 2009 Belton, Missouri Blue Springs, Missouri 1, Gladstone, Missouri Grandview, Missouri 1, Independence, Missouri 5, , Kansas City, Kansas 8, , Kansas City, Missouri 31, , Leavenworth, Kansas 1, Leawood, Kansas Lee's Summit, Missouri 1, Lenexa, Kansas Liberty, Missouri Olathe, Kansas 1, , Overland Park, Kansas 4, , Prairie Village, Kansas Raytown, Missouri 1, Shawnee, Kansas 1,

19 Table 9. Measures of Housing Market Conditions for the Kansas City Area Supply of Housing: Units for Sale or For Rent Location Vacant Housing Units Vacant Housing Units For Sale for Owner Occupancy For Rent for Renter Occupancy 2009 Percent 2000 Percent 2009 Percent 2000 Percent Vacant Vacant Vacant Vacant Nation United States 2,436, ,423, ,815, ,676, Metrpolitan Area Kansas City, MO-KS 17, , , , Counties Cass County, Missouri Clay County, Missouri 1, , , , Clinton County, Missouri Jackson County, Missouri 7, , , , Johnson County, Kansas 2, , , , Lafayette County, Missouri Leavenworth County, Kansas Miami County, Kansas Platte County, Missouri , Ray County, Missouri Wyandotte County, Kansas 1, , , , Cities over 20,000 population in 2009 Belton, Missouri Blue Springs, Missouri Gladstone, Missouri Grandview, Missouri Independence, Missouri , , Kansas City, Kansas 1, , , , Kansas City, Missouri 6, , , , Leavenworth, Kansas Leawood, Kansas Lee's Summit, Missouri Lenexa, Kansas Liberty, Missouri Olathe, Kansas Overland Park, Kansas , , Prairie Village, Kansas Raytown, Missouri Shawnee, Kansas

20 Table 10. Measures of Housing Market Conditions for the Kansas City Area Supply of Housing: Units by Year Built and Selected Physical and Financial Conditions Location Units by Year Built Selected Physical and Financial Conditions Owner Units Renter Units Owner Units Renter Units Percent Percent Percent Percent Percent Percent Percent Percent built 2000 built 1959 built 2000 built 1959 One Two One Two or later or earlier or later or earlier Condition Conditions Condition Conditions Nation United States Metrpolitan Area Kansas City, MO-KS Counties Cass County, Missouri Clay County, Missouri Clinton County, Missouri Jackson County, Missouri Johnson County, Kansas Lafayette County, Missouri Leavenworth County, Kansas Miami County, Kansas Platte County, Missouri Ray County, Missouri Wyandotte County, Kansas Cities over 20,000 population in 2009 Belton, Missouri Blue Springs, Missouri Gladstone, Missouri Grandview, Missouri Independence, Missouri Kansas City, Kansas Kansas City, Missouri Leavenworth, Kansas Leawood, Kansas Lee's Summit, Missouri Lenexa, Kansas Liberty, Missouri Olathe, Kansas Overland Park, Kansas Prairie Village, Kansas Raytown, Missouri Shawnee, Kansas

21 Matchup of Incomes and Prices: By Location Nationwide both median rents and median values rose faster than incomes for both owners and renters. This is not necessarily a problem for owners. If the homeowner purchased the home at an earlier time, the increase in value can mean a gain the wealth of the homeowner with little increase in the cost of owning the home. However, if the household is a recent first-time homebuyer, the rapid rise in prices can increase the costs of becoming a homeowner and may even prevent the transition to homeownership. For renters, there are no gains with increases in rents. When rents rise faster than incomes, as they have done nationwide as well as in Kansas City, renters have little choice but to allocate an increasing share of income toward housing and forego consumption in other areas like food, clothing and transportation. The run-up of housing values and rents during the first decade of the new century was dramatic in the Kansas City area as elsewhere. Home values rose over twice as fast as the incomes of homeowners. Rents rose four times as fast as the incomes of renters. For rents and values to rise so much faster than incomes is not sustainable, as we have learned with the great recession led, in large measure, by the collapse of the housing market. When prices rise faster than incomes, it has implications for housing affordability. However, there is evidence that prices in the metropolitan area are not the sole source of housing affordability problems. Prices in the Kansas City area are lower than national norms and are rising more slowly. Note that the Consumer Price Index for the metropolitan area rose 20.6 percent from 2000 to Thus, the value of a typical owner-occupied home rose by almost 28 percentage points more than inflation over the nine-year period. The growth in rents aligned much more closely with inflation but still rose much faster than inflation. Rents rose about 9 percentage points faster than inflation over the nine-year period. Median values of owner-occupied homes are 16 percent lower in the area than the national median. Similarly, median gross rents are 9 percent lower in the area than in the nation. (Gross rent is the contract rent paid to the landlord plus the cost of other utilities not included in the rent.) In addition, both values and rents are rising more slowly in the Kansas City area than in the nation over the years since But median incomes for both owners and renters are higher in the Kansas City area than the national median incomes. 20

22 Table 11. Measures of Housing Market Conditions for the Kansas City Area Matchup of Demand and Supply by Location Location Median Value and Income Median Gross Rent and Income Owner Units Renter Units Change Change Median Median Change Median Median Median Change Median Value Value Median Owner Gross Rent Gross Rent Median Renter Value Income Gross Rent Income Nation United States 185, , Metrpolitan Area Kansas City, MO-KS 155, , Counties Cass County, Missouri 151, , Clay County, Missouri 152, , Clinton County, Missouri 145,100 91, Jackson County, Missouri 127,700 84, Johnson County, Kansas 206, , Lafayette County, Missouri 118,000 78, Leavenworth County, Kansas 160, , Miami County, Kansas 163, , Platte County, Missouri 185, , Ray County, Missouri 123,900 85, Wyandotte County, Kansas 95,800 53, Cities over 20,000 population in 2009 Belton, Missouri 121,000 81, Blue Springs, Missouri 149, , Gladstone, Missouri 143, , Grandview, Missouri 109,900 78, Independence, Missouri 108,800 76, Kansas City, Kansas 93,100 51, Kansas City, Missouri 132,900 83, Leavenworth, Kansas 120,600 74, Leawood, Kansas 373, , , Lee's Summit, Missouri 183, , Lenexa, Kansas 214, , Liberty, Missouri 165, , Olathe, Kansas 190, , Overland Park, Kansas 220, , Prairie Village, Kansas 200, , , Raytown, Missouri 111, Shawnee, Kansas 196, ,

23 Matchup of Incomes and Prices by Market Segment The housing market of the metropolitan area (or any metropolitan area) is not one housing market but many. Each submarket is defined by price points and the substitutability of its units with units from other submarkets. The submarkets can be approximated by dividing the housing in the metropolitan area by tenure and price range. Similarly, the demand for this housing can be approximated by dividing the households in the metropolitan area into categories defined by tenure and income range. The income and price categories correspond to the homes that could be afforded with a housing cost burden of no more than 30 percent of income being allocated to housing costs. The various submarkets can be described by the matchup between the number of households in each submarket and the number of housing units in the submarket. For example, renters with incomes from $20,000 to $35,000 can afford units renting for $500 to $900 per month. The market is in balance if the number of units in this price range closely approximates the number of households in this income range. If the number of households is significantly greater than the number of units, this scarcity exacerbates the housing affordability problems. If the number of units is greater than the number of households, this surplus lessens the affordability problems. This analysis provides some insights into the extent to which high housing cost burden is a function of incomes being too low or housing prices being too high or both. Some households choose to consume housing at a price point that stretches the households incomes beyond the 30 percent threshold. This is not a public policy problem if the household is in the middleor upper-income categories. This is especially true when households have viable choices at lower price points. These households have chosen to consume more housing than would be considered normal, but the choice reflects the households propensity to consume more housing than other households. It is also true that many middle- and upper-income households choose to allocate below-average shares of income toward housing. This means that they exercise their choice to consume less costly housing than they can afford. If there is sufficient housing at the lower price points, the reduced consumption does not pose a problem. If there is a shortage of housing at the lower price points, the reduced consumption at the higher price points can create increased competition for the housing at the lower price points. The increased competition for the lower-priced housing can create scarcity, raise prices, and force more low-income households into high housing cost burdens. Among homeowners, the nation is has too few units at the lowest-price category, units priced under $60,000. The shortage is about 5 percent of the stock. The supply in this price range would need to expand by almost 5 percent to bring the number of units in line with the number of households. The categories above the $60,000 value level are at par with demand or are in surplus with the anomaly of the $150,000 to $300,000 price category. This category is also in a shortage condition, but the shortage may reflect the overbuilding of high-priced housing that occurred during the first decade of the century. The high-priced homes, those over $300,000, are in surplus by over 20 percent The greater Kansas City area housing market for owner-occupants is much more balanced than is the national market. (See Chart 1.) Only the highest price category shows any significant shortage. It is doubtful that middle- and upper-income households are confronting a shortage of housing to consume. Rather, the number of higher priced reflects the choices made by many households to consume lower- 22

24 priced housing. This does not appear to be a significant problem as there is a surplus of units among moderately priced homes ($60,000 to $150,000) and almost perfect balance among the lowest priced homes (under $60,000). Chart 1. Matching Owner-Occupant Households by Income Category with Owner Units by Value Category Kansas City Metropolitan Area 2009 Among renters, the nation is very short of units priced at low- and moderate-rent levels (rents below $500 per month). The national shortage is over 5 million units. Yet, at rent levels between $500 and $900 per month, there is a surplus of almost 7 million units. The Kansas City metropolitan area follows the same pattern. There is a shortage of about 32,000 units at rents below $500, but there is a surplus of over 65,000 units in the $500 to $900 range. 23

25 Households and Units Housing Affordability in the Greater Kansas City Area Chart 2. Matching Renter-Occupant Households by Income Category with Rental Units by Rent Category Kansas City Metropolitan Area , , , ,000 50,000 0 Income: Less than $10,000 Rent: Less than $250 Income: $10,000 to $20,000 Rent: $250 to $500 Income: $20,000 to $35,000 Rent: $500 to $900 Income: $35,000 to $50,000 Rent: $900 to $1,250 Income: $50,000 to $100,000 Rent: $1,250 to $2,000 Income: $100,000 or more Rent: $2,000 or more Renter Households in Income Category and Rental Units in Rent Category Households by income category Units by Rent Category 24

26 Spatial Distribution of Housing Shortages and Surpluses Unfortunately, this seeming balance across the metropolitan area does not hold up upon closer inspection at the city and county level. Table 12 describes the spatial distribution of shortages and surpluses in the markets for owner-occupied housing. Map 1 illustrates the shortages and surpluses in the submarkets for homes valued at less than $60,000. Several counties have shortages of homes priced below $60,000. Clay and Clinton counties have shortages as do the more urban Johnson and Platte counties. Johnson and Platte counties also have shortages for homes priced from $60,000 to $100,000. In contrast, Jackson County is much more balanced in the market for homes priced below $60,000 reflecting the higher incidence of older, central city housing. The problem of an aging housing stock with much of it suffering from low values pushed Wyandotte and Leavenworth counties into a surplus of homes priced below $60,000. The more rural Ray and Lafayette counties also have surpluses of homes affordable to households with incomes below $20,000. At the city level, the incidence of surpluses and shortages corresponds to the conditions in the counties. The Johnson County cities of Leawood, Lenexa, and Overland Park all have severe shortages of homes priced not only below $60,000 but also priced below $100,000. The shortages in these cities are in excess of 200 percent of the stock. This means that the stock of homes in these price ranges would have to grow by over 200 percent to satisfy the housing demand just from the low-income households who live in these cities now. The housing market conditions for low- and moderate-income renters are much more uniform across the metropolitan area than is the case for owners. Among renters, nearly all markets have shortages of rental units affordable to the renter households residing in these markets. (See Table 13 and Map 2.) The markets for renters in the Kansas City area have shortages in the rent ranges $250 to $500 and below $250 with surplus in the $500 to $1,250 range. The counties tend to follow this pattern. Clinton, Jackson, Johnson, Leavenworth and Platte counties all have shortages in excess of 200 percent for the lowest priced rental units, those priced below $250 per month. The cities also tend to follow this pattern. However, there is a noticeable pattern for Johnson County communities to have very significant shortages of low-priced rental units. Leawood, Lenexa and Prairie Village all have shortages in excess of 500 percent. 25