The rental affordability crisis is showing signs of worsening: Nearly half of all renters are struggling to pay their monthly payments, according to a new report by Harvard’s Joint Center for Housing Studies.
Financial experts usually recommend keeping housing costs around 30 percent of a person’s monthly income. However, the number of renters considered “cost-burdened” – those who spend more than 30 percent of their income on rent – is rising and topped 21.3 million people last year, according to the report. Even more concerning, more than 26 percent are considered “severely cost burdened” and spend more than half of their income to pay for rent.
Read more: Why Renters Can’t Make the Move
Rental costs are skyrocketing across the country, much faster than wages. Inflation-adjusted rents climbed 7 percent from 2001 to 2014. In that same time period, household incomes fell 9 percent, according to the report. Demand for rentals is high, which has pushed vacancy rates down, and given landlords more reason to raise prices.
“These trends have led to record numbers of renters paying excessive amounts of income for housing, with little prospect for meaningful improvement,” according to the report.
The median rent for a new apartment climbed to $1,372 last year, a 26 percent increase from 2012.
It’s not just low-income households that are struggling to keep up too. The number of burdened households with an income of $45,000-$74,999 surged to 21 percent in 2014 from 12 percent in 2001.
The gap between rental costs and household income is widening to unsustainable levels across the country, according to a study released earlier this year by the National Association of REALTORS®. And as more renters face steeper costs, it may put them even further away from home ownership. NAR evaluated income growth, housing costs, and changes in share of renter and owner-occupied households over the past five years in metropolitan statistical areas across the U.S. Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, according to their research.
Source: “Half of All Renters Can’t Afford the Rent,” CNNMoney (Dec. 9, 2015)