Philadelphia’s Housing Cost-burden: A Pre- and Post-Pandemic Comparison

In previous Leading Indicators we monitored rising housing cost-burden in Philadelphia amidst increasing rents throughout 2020 and 2021. Cost-burden is defined as paying more than 30% of gross household income on mortgage or rent [1]. While the reality of living with housing cost-burden is different for low- and high-income households, it is a useful classification for understanding the effects of the changing housing market across income levels. With the recent availability of the U.S. Census Bureau’s 2021 American Community Survey five-year estimates, we analyze changes in Philadelphia’s housing landscape between 2016 and 2021. Through this comparison, we see the impacts of interventions in the city’s rental market in the wake of the COVID-19 pandemic.

What You Need to Know

• Between 2016 and 2021, the number of Philadelphia homeowners and renters making more than $75,000 a year increased by more than 9% when adjusting for inflation, reflecting the city’s rising median income.

• Between 2016 and 2021, Philadelphia’s real median income increased from $46,910 to $52,649, indicating that the growing population skewed towards higher-income households or that the existing population experienced increases in their household income levels.

• Between 2016 and 2021, Philadelphia renting households annually earning more than $75,000 increased by almost 34,000 while the number of owner-occupied households earning more than $75,000 increased by nearly 49,000.

• The overall percentage of Philadelphia households facing cost-burden decreased from 29.8% to 26.7% between 2016 and 2021, but the change in cost-burden varied across income brackets.

• Cost-burden rates increased between 2% and 5% for all Philadelphia homeowners annually earning less than $75,000 between 2016 to 2021.

• The overall percentage of Philadelphia renting-households experiencing cost-burden decreased from 51.5% to 48.3% between 2016 and 2021. Yet, like homeowners, the change in cost-burden varied across income brackets.

• Philadelphia’s renting households are far more likely to be experiencing cost-burden than homeowners, especially for households annually earning between $20,000–$50,000.

• Between 2016 and 20201, the percentage of renting households experiencing cost-burden in Philadelphia increased by 13% for households earning between $35,000 and $50,000 and increased by 12% among households earning between $50,000 and $75,000.

• Rising interest rates and ballooning home values in late 2020 and 2021 kept some potential new homeowners out of the real estate market, leading to an increase in the proportion of renters making between $35,000–$75,000 in 2021.

• While there was a significant increase in cost-burdened renting households making between $35,000 and $75,000 in Philadelphia between 2016 and 2021, there was only a small increase in cost-burdened renters with a household income below $35,000 (roughly 4%). This may be due to the various forms of pandemic-related emergency financial aid and assistance provided by both the federal government and the city to the renting households needing the most relief.

Philadelphia’s Owners and Renters

Between 2016 and 2021, there were significant changes in the distribution of renters and owners across income brackets in Philadelphia. While the city’s total population grew by 10% between 2016 and 2021, the general split between owners and renters remained nearly even, with owners accounting for roughly 52% of the population in 2021. However, as Figure 1 illustrates, the distribution of renters and owners by income bracket changed significantly over this five-year period. For both renters and owners, the percentage of Philadelphia households making $75,000 a year or above has increased by more than 9 percentage points. 

FIGURE 1 

SOURCE: 2016 and 2021 five-year estimates from the U.S. Census Bureau’s American Community Survey

The simultaneous increase in both renters and homeowners in the upper income bracket reflects an overall shift in income levels among Philadelphia’s residential population during this period. Between 2016 and 2021, Philadelphia’s real median income increased from $46,910 to $52,649, indicating that the growing population tended to be higher earners and/or that the existing population experienced increases in household income.

While the rising median income suggests greater buying power for Philadelphia residents, above-market housing prices and rising interest rates kept many would-be homeowners in the rental market, especially amongst lower-income households. As shown in Figure 2, this change is most evident in the $35,000–$75,000 income brackets, where the total number of homeowners decreased or stayed constant, while the number of renters increased. This visual also emphasizes the dramatic increase in households earning more than $75,000 annually, as the number of renting households in this income bracket increased by almost 34,000 and the number of owner-occupied households increased by nearly 49,000.

FIGURE 2 

SOURCE: 2016 and 2021 five-year estimates from the U.S. Census Bureau’s American Community Survey

Housing Cost-burden

Aligned with the shift towards higher-income-bracket households in Philadelphia, the overall percentage of cost-burdened renters and owners decreased from 2016 to 2021. However, the change in cost-burden varied between renters and owners and across income brackets.

Between 2016 and 2021, the proportion of cost-burdened homeowners decreased slightly from 29.8% to 26.7%. Yet, Figure 3 shows that rising costs in the housing market resulted in increasing cost-burden rates for all homeowners earning less than $75,000. In each of these income brackets, cost-burden rates increased by 2%–5% from 2016 to 2021. It is possible that the overall decrease in cost-burdened households in Philadelphia may be explained by the significant increase in the number of homeowners in the highest income bracket, a group with very low rates of cost-burden.

FIGURE 3 

SOURCE: 2016 and 2021 five-year estimates from the U.S. Census Bureau’s American Community Survey

The overall percentage of renters who are cost-burdened also decreased from 51.5% to 48.3% from 2016 to 2021 yet Figure 4 illustrates an increased cost-burden rate in each individual income bracket. This anomaly may be attributed to both the significant increase in renters in the highest income bracket as well as a movement of some renters into homeownership during the first two years of the pandemic, shrinking the overall pool of renting households. Making up nearly a quarter of all renters in 2021, high-income households experience the lowest rate of cost-burden, likely resulting in a decreased rate across the city.

Notably, renters are far more likely overall to be cost-burdened than homeowners, especially for households making between $20,000–$50,000. Renters earning between $35,000 and $75,000 experienced the greatest increase in cost-burden between 2016 and 2021, which can be attributed to rising rents outpacing inflation. Rents rose quickly in 2021, with Philadelphia’s median rent up 11% over 2020 [3].

FIGURE 4 

SOURCE: 2016 and 2021 five-year estimates from the U.S. Census Bureau’s American Community Survey

While lower-income-bracket households are still the most likely to face cost-burden, rising rents in 2021 do not appear to have had the same impact on renters making below $35,000. The smaller shift in cost-burden amongst these households, though counterintuitive, may reflect the federal and local aid for renters in response to the pandemic. Although 2021 was marked by a significant increase in rent, this acceleration came after a year of rent stagnation. Rental cost-burden likely decreased in 2020 as rents either stabilized or in some cases, decreased [2]. In fact, a 2021 survey of Philadelphia renters showed that 65% of participants did not experience a rent increase in 2020 [4]. The survey, administered to a mixture of rent relief applicants and other households, suggests that those facing the highest cost-burden were provided relief.

In addition to relief provided by a decelerating rental market, Philadelphia’s rental assistance program provided aid through payments to landlords and tenants. Throughout the duration of the program, from May 2020 to January 2023, Philadelphia distributed $299 million to 46,000 households [5]. In Phase 4 alone, which gave out $233 million in aid, 75% went to households making <30% of the area median income, or $22,700 for a two-person household.

The aid provided to these households may explain the relatively low rise in cost-burden within the two lowest income brackets. This is one plausible explanation for the discrepancy between the lowest two income brackets and the others. However, it is unknown how this type of government aid, resulting in changes in income and housing costs, impacted census estimates.

Takeaways for 2023

In 2023, Philadelphia still faces rising rents and relatively high interest rates for home mortgages. Rents continued to rise in 2022, increasing 10% since 2021 [6], and demand for rentals is still high as peaking interest rates prohibit many would-be buyers from purchasing homes. In fact, rental burden increased nationally in 2022, with the average US rent-to-income ratio surpassing 30% for the first time in twenty years [7].

The most recent estimates of rental cost-burden reveal a striking disparity in how high housing costs affect Philadelphia’s residents differently. While rising costs are felt by all, lower-income households face a disproportionate burden. Yet, these estimates also suggest that the federal and local interventions can be effective in supporting renters needing relief. In 2023, the trends of decreasing housing affordability and increasing cost-burden are likely to continue, but – as of right now – there are few systems in place to provide aid to the most vulnerable households, especially renters.

Works Cited

[1] Cromwell, Molly. 2022. “Renters More Likely Than Homeowners to Spend More Than 30% of Income on Housing in Almost All Counties.” U.S. Census Bureau, 8 December. Retrieved from: https://www.census.gov/library/stories/2022/12/housing-costs-burden.html.

[2] Veiga, Alex. 2021. “Rising rents taking up growing share of Americans’ income.” AP News, 4 November. Retrieved from: https://apnews.com/article/coronavirus-pandemic-business-lifestyle-health-prices-f4f279a4250fa95dd540c6de7247f3d5.

[3] Bond, Michaelle. 2021. “Rents are expected to grow faster than home prices in 2022.” The Philadelphia Inquirer. 23 December. Retrieved from: https://www.inquirer.com/real-estate/housing/philadelphia-rising-rent-rental-assistance-20211223.html.

[4] Aiken, Claudia, Sydney Goldstein, Yeonhwa Lee. 2022. Trends and Challenges in the Philadelphia Rental Market. Philadelphia, PA: Community Legal Services. Retrieved from: https://clsphila.org/wp-content/uploads/2022/06/CLS_Report_6-14_Small-1.pdf.

[5] City of Philadelphia. N.d. “Philadelphia COVID-19 Emergency Rental and Utility Assistance Dashboard.” COVID-19 Emergency Rental Assistance Program. Retrieved from: https://phlrentassist.org/dashboard/.

[6] Sparber, Sami. 2023. “Philadelphia rents are still high, for now.” Axios Philadelphia, 30 June. Retrieved from: https://www.axios.com/local/philadelphia/2023/01/30/philadelphia-rents-still-high.

[7] Chen, Lu and Mary Le. 2023. “Key Takeaways from the 4th Quarter Housing Affordability Update.” Moody’s Analytics, 19 January. Retrieved from: https://cre.moodysanalytics.com/insights/market-insights/q4-2022-housing-affordability-update/.