Navigating Divorce in a Housing Crunch

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It’s no secret that the Golden State is a costly place to live. California home values and rents are among the highest in the nation, and housing costs have soared over the last few years.

“Divorced and separated couples are facing their worst nightmare: sharing a house with the person they want to get away from,” the Wall Street Journal reported near the end of last year. “Behind the uneasy arrangement is the housing market. Mortgage rates are over 7%, and home prices have hit record highs.” And, says WSJ, “Some people on the brink of divorce are pulling back from actually filing because of uncertainties about jobs and added expenses of setting up two households.”

Consider these statistics:

According to the Public Policy Institute of California (PPIC), a non-partisan research center, “Residents in all major regions express concern about housing affordability… Statewide, 68% say housing affordability is a big problem in their part of the state.”

In its second annual report, “2023 Housing Underproduction in the U.S.,” Up for Growth showed that California has not only a crisis of affordability but by far the most severe housing shortage in the nation—needing about 900,000 more homes.

Renters bear the biggest burden. Financial advisors and The Department of Housing and Urban Development recommend maintaining a rent-to-income ratio of less than 30% for economic health. A 2023 study by Forbes Home found that the average renter in California spends 28.47% of their income on rent, the second-highest percentage in the nation, after Hawaii. However, it’s important to remember that those are statewide averages, and housing can be significantly costlier in urban centers like San Francisco and Los Angeles.

Recent PPIC findings indicate that more than half of the state’s renters—and about 40% of homeowners with a mortgage—spend 30% or more of household income on housing. Data from Vital Signs reveals that in 2021, a third of Bay Area households spent more than 35% of their income on housing; from 2020 to 2021, the percentage of cost-burdened renters increased from 38% to 41%.

Many families—renters and homeowners/buyers alike—feel the crunch. However, the housing crunch creates another layer of complexity for divorcing couples. In addition to the central issues in divorce—division of property, custody/visitation, and spousal/child support—they may face very tough choices in terms of post-divorce housing—affecting everything from affordability to standard of living, to co-parenting and getting on with personal life.

High rents, high home prices, and high mortgage rates make securing new housing difficult, especially for individuals who are already financially strapped. Divorce is expensive—research shows that five years out, about a third of divorced individuals say they have still not fully recovered financially.

It’s a hard reality that living apart costs more than living together. Finding suitable housing as a single person—especially a single parent—can be daunting. Soon-to-be-exes, especially those who will be co-parenting, may find they have limited options in where they can afford to live, whether buying or renting. In looking for a new home, they have to consider how a new neighborhood might impact their overall quality of life, their custody and visitation arrangements, kids’ school/activities/friends, proximity to work and family, and more.

The tight housing market can also complicate property division. The family home is often the most significant asset to divide in a divorce and an emotionally complex one. For couples who own a house together, high mortgage rates may make it nearly impossible for one partner to buy out their ex’s share. Both partners may face shared debt if their home price has fallen or they owe more on the mortgage than the home is worth. Even selling the shared home may generate revenue that enables them to rent a place in the same area where they have been living. It’s challenging even to begin the hunt for new housing before the divorce is final while so much is still unknown.

All this extra upheaval and uncertainty can pressure couples to settle sooner to understand their post-divorce finances better and make better-informed housing decisions. Some couples, says WSJ, although they would prefer a clean break, are moving ahead with their divorce “but negotiating agreements to defer selling or refinancing the house.”

Families who have been leasing a residence face another set of questions. They have to consider whether one partner wants to stay in the marital home while they both contribute to rent (in some cases, the court awards retention of the rented home to one partner), whether the landlord will allow them to sublet so they can both move out, what the financial consequences will be if they break the lease and split the penalty, and so on.

Some couples opt to keep cohabiting for the sake of housing stability while trying to establish new boundaries, private spaces, separate finances, and independent lives. It’s not an easy path, but they make it work while waiting it out.

When you decide to begin your separation and divorce process, it’s wise to seek the advice of a financial adviser, qualified real estate professional, and attorney.

The veteran family lawyers at SFLG can help you navigate the complexities of divorce in a tough housing market and help you reach an optimal settlement so you can move on with your life.

By Debra Schoenberg


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