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Housing expenses eating up incomes

More than a fifth of South Florida homeowners spend at least half their income on housing costs. Miami-Dade had the highest rate in the U.S.

Miami Herald - 9/12/2007 12:00:00 AM
by Evan S. Benn, Niala Boodhoo and Rob Barry

When Micheline Louis-Charles bought a house in North Miami 20 years ago, her salary as a full-time nursing assistant was enough to pay her mortgage and raise five kids.

But since then, her monthly house payment, which includes mortgage, taxes and insurance, has doubled to $1,200 a month, and her income has not kept pace. She takes home $649 every two weeks. With her children gone, she rents out a room in her three-bedroom house to help cover costs.

Louis-Charles is part of a growing group of homeowners who spend at least half of their pretax income on mortgages, insurance, property taxes and other housing costs, according to Census Bureau figures being released today.

''Everything goes toward the house. I survive in a very hard way,'' said Louis-Charles, 58. When asked if she has thought of selling her house, she says, simply: ``Where would I go?''

The latest numbers show that Miami-Dade topped all counties nationwide last year with the highest percentage of homeowners who spent at least half of their money on housing costs; Broward ranks sixth in that category.

Some cities in particular highlight the crunch. About 29 percent of homeowners in Miami, 26 percent in Miami Beach and 25 percent in Miramar lose half or more of their household income when it comes time to make mortgage payments.

Nationwide, about 12 percent of homeowners pay more than half of their household income on ownership costs. The figures come from the U.S. Census' 2006 American Community Survey, which polls a sample of the total population. As a result, figures -- particularly for smaller areas -- may be imprecise.

One reason mortgage costs are eating away at salaries is because home prices have dramatically increased in recent years, but wages have remained relatively flat.

''It's a good news, bad news thing,'' said Ralph Stone, Broward's director of housing and community development. ``The good news is people's homes are very valuable nowadays. The bad news is those values have way outpaced wage increases, so we have this ever-increasing gap of what people can afford.''

RETHINKING CAREER

Consider Gustavo Frances. Owning his share of the American Dream has forced him to rethink his career.

Frances, 28, a Broward County assistant public defender, watches each month as the mortgage payments on his two-bedroom Miami condominium practically drain his paycheck.

''I don't know how long I'll be able to continue doing what I like to do,'' said Frances, who is thinking about jumping to private practice. ``I want to help people, but I may have to put that aside for my own financial benefit.''

The picture is almost as bleak for South Florida renters, who are forced to shell out more and more money to cover their landlords' costs.

About 61 percent of Miami-Dade's renters pay more than 30 percent of their household income in rent, the fifth-highest rate in the country. The same applies for about 54 percent of Broward's renters.

Miami-Dade is home to the most unaffordable city in the country for renters: Hialeah. A staggering 74 percent of Hialeah renters spend about a third or more of their household income on rent costs.

The figures came as no surprise to Tony Villamil, CEO of the Coral Gables-based Washington Economics Group and chairman of the Economic Roundtable of the Beacon Council in Miami-Dade.

''We're in an area where housing prices need to stabilize and come down moderately so incomes can catch up with the prices of homes,'' Villamil said.

South Floridians should be spending about 28 percent to 30 percent of their household income on housing costs, Villamil said -- not 50 percent or more.

NEW RULES

''The rule used to be that you can afford a home that costs about 2 ½ times your income,'' Villamil said. ``Somebody making $50,000 a year should be able to buy a home in the $150,000 range. But the average price of a home here is $370,000, and people just aren't bringing in enough money to afford that.''

It may be awhile before housing prices come down, Villamil said, because land in South Florida is scarce. He suggested trying to attract more higher-earning workers like people in biotechnology and international trade.

''Those types of jobs will eventually bring some stability,'' Villamil said. ``The hope is that incomes will catch up with home prices. But right now, this is an overpriced area.''

Miami Herald staff writers Jennifer Lebovich and Lisa Arthur contributed to this report.