Kansas LMI Housing Trends and Challenges

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This article is based on a presentation given at the 2024 Kansas Housing Conference with some information appearing different than the presentation. The presentation is downloadable here.

The housing situation for low- and moderate-income households in Kansas follows many of the national trends:

• Most lower-income households are highly burdened by housing costs.
• Housing is getting more expensive.
• Housing production is low.

This article provides details of those trends and challenges as they pertain to Kansas.

Housing Cost Burdens

Higher housing costs have especially been a challenge for renters, as nearly 80% of low-income (<$30,000) renters in Kansas were burdened^_ by housing costs in 2022, compared to over 60% of low-income homeowners (Chart 1). While over half of low-income homeowners were also burdened by housing costs, a significant share of them were burdened by utilities. When excluding utilities, only 35% were burdened by housing costs (see presentation). Homeowners likely experienced less burden from their mortgage, taxes, and insurance since debt-to-income ratios limit how much mortgage someone can take out. Such limitations do not exist for rental housing.

Chart 1: High percentage of lower-income renters and owners are burdened by housing costs

There is significant variation in the ability of the average renter to afford rent across regions of Kansas. Wages in smaller regions of Kansas like Salina and Lawrence put the average renter in a difficult position to afford rent (Table 1). Meanwhile, the Kansas City area has the highest fair market rent in Kansas, but wages for the average renter are just high enough to afford rent. However, the use of average wages in the calculation may underestimate the number of work hours needed for most renters to be able to afford rent.

Table 1: The average single-earner renter household can afford the fair market rent in most regions of Kansas

Housing Prices

Lower-end housing prices have increased more than lower-end wages in recent years in Kansas (Chart 2). Purchase prices for homes in the lowest third of home prices increased nearly 20% between 2020 and 2021. That was about equal to the total increase over the prior three years. The concern with prices rising that fast in such a short time span is the potential for homeowners to experience price shocks from higher insurance and taxes. Since 2021, wages for the lowest third of homeowners have continued to increase whereas home price increases have slowed, potentially relieving some of the extreme pressures during the pandemic.

Chart 2: Home prices in Kansas have risen more rapidly than incomes at the bottom

Chart 3: Rents are rapidly increasing in Kansas metros

Causes for Price Increases

Home prices and rents have risen for several reasons, and one of the biggest reasons is a lack of new home construction. Without an adequate supply of new homes, households find it difficult to move on from starter homes and aspiring homeowners experience higher competition for existing homes. Since the Great Financial Crisis (GFC) in 2007, single-family home construction has not returned to historical levels (Chart 4). That is before taking into account the natural increase of the baseline number of new homes needed as the population increases. Multi-family construction was not as severely impacted by the GFC, but there have also been historically low numbers of multi-family units constructed since 1990. While multi-family construction increased during the pandemic, the increase does not offset the low level of single-family home construction. Thus, the growing competition for single-family and multi-family housing is pushing up prices and rents.

Chart 4: Building permits have not recovered since the Great Financial Crisis

Part of the difficulty of constructing more homes is that since the GFC, the number of construction jobs and firms have not recovered. Both the number of residential construction firms and workers are down about 10% from where they were in 2001 (Chart 5). Without an adequate number of firms and workers, there are only so many homes that can be built. The construction field has also had little productivity growth over the last thirty years, meaning the construction field needs more firms and workers to increase the number of units produced.

Chart 5: Residential construction employment and establishments have not recovered since the Great Financial Crisis

Conclusion

The charts and presentation shared here focus on the challenging housing situation in Kansas. However, what is happening in Kansas is largely reflected at the national level as well. Structural issues in housing finance and construction have led to lagging construction compared with historical norms. This has pushed up housing prices for both owners and renters. Compounding the issue for lower-income households is that it is exceedingly difficult to provide new housing at affordable prices. As such, there has long been government investment into housing as well as housing supports for lower-income households. However, government funding for tenant-based assistance has largely only kept pace with inflation and most other housing supports have largely not grown at all (Chart 6).

Chart 6: HUD funding for low-income households has largely been stagnant when adjusted for inflation