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Military Veterans, Some Active-Duty Households Enjoy a Housing Affordability Edge

Joshua Clark

Active-duty military households spend 24.9% of their incomes on market rent, while veteran households spend 20.1% – significantly less than the 29.6% of income that the typical U.S. household pays for rent in 2019. Service members and veterans also pay a lower share of their incomes on mortgages: 13.4% and 10.9%, respectively, compared with 16% for all U.S. households.

Some of the affordability advantages of active-duty service members and veterans likely stem from a few of the little-discussed benefits they receive for their service. Most notably, military personnel that do not live in government-provided housing (typically on-base housing) receive housing stipends on top of their base pay in the form of the Basic Allowance for Housing, which help defray housing costs. Medical care for military members, veterans and their families is also often free or heavily subsidized depending on their status, leaving more money to spend on housing. Finally, service members have a range of high-quality, on-the-job training opportunities in fields as diverse as IT, mechanical repair and engineering — valuable skills they can take with them into the civilian workforce to help boost their income after their time in the military.

Active-duty differences

Depending on where you live, the affordability break may be even more drastic. Active-duty military households in Florida see the best affordability relative to the general population. Active troops who rent in Miami, Orlando and Tampa pay less of their income than the typical renter in those areas — by 15 percentage points, 11.7 percentage points and 11.3 percentage points, respectively. Those same markets also see the greatest affordability breaks for home buyers, whose mortgage payments are 8.6 percentage points (Miami), 7.5 percentage points (Orlando) and 6.6 percentage points (Tampa) less of their income than the typical U.S. home buyer.

Unfortunately, there are some markets where affordability is actually worse for active-duty military households compared to the rest of the population. Military households are feeling the squeeze in Seattle, San Diego, and Portland, Ore., where renters can expect to pay 7.5 percentage points, 5.2 percentage points and 2.2 percentage points more of their income than the general population. Similarly, military members in those metro areas pay 6.9 percentage points (Seattle), 4.7 percentage points (San Diego) and 2 percentage points (Portland) more of their income than typical buyers in the same areas.

One reason affordability may appear worse for military members in these metros is the large amount of high-paying civilian jobs, which help push up housing costs overall.

The veteran edge

Veterans also see large differences in affordability compared to the national figures. The markets with the largest split between veteran and non-veteran rent affordability are Miami, Los Angeles, Riverside, Calif., and San Diego, where veterans typically spend 10.8 percentage points, 10.1 percentage points, 8.0 percentage points and 7.8 percentage points less of their income on rentals than the general population. The fact that San Diego offers some of the biggest affordability advantages for veterans while some of the worst for military members suggests that military members may be able to transition to better paying jobs after their service in the city.

Advantages for home buyers are similar, with the largest gains occurring in Los Angeles, San Francisco, San Diego and Miami, where veteran homeowners spend 9.5 percentage points, 7.1 percentage points, 7 percentage points and 6.2 percentage points less of their income than the general population.

Across markets, veterans' rent and mortgage affordability is better than the general population. The smallest rent benefits occur in Pittsburgh, Minneapolis, and Buffalo, N.Y., where veteran renters pay 1.2 percentage points, 1.5 percentage points and 2.5 percentage points less of their income toward rent than the typical renter. Those same three cities also see the smallest benefits in mortgage affordability with veterans paying 0.5 percentage points (Pittsburgh), 1 percentage point (Minneapolis), and 1.5 percentage points (Buffalo) less of their household income toward a mortgage than the typical homeowner.

Methodology

Zillow analyzed salary and income data for a selection of active military members and veterans from the U.S. Census Bureau, American Community Survey, 2017 microdata, made available by IPUMS USA, University of Minnesota, www.ipums.org. We excluded the income of individuals living in group quarters.

To calculate the typical monthly mortgage payment, we first gathered mortgage rate information from Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US. Then using the most recent available rate (October 1, 2019), we calculated the typical mortgage payment for the median-valued home in a metro area using the metro-level Zillow Home Value Index (ZHVI) for June 2019. Finally, we considered what portion of the typical household’s salary goes toward this monthly mortgage payment.

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