There’s a crisis mounting when the amount of rent starts to eclipse a mortgage in terms of what people are paying every month for suitable (or even unsuitable) housing. A recent nation-wide survey spells it the roots of the problem: rents are increasing much faster than wages. Inflation-adjusted rents increased 7% from 2001-2014 while household incomes dropped 9%. At the same time, rising demand for rental units has pushed the national vacancy rate to a 30-year low, driving prices even higher.
Numbers don’t lie
What’s scary, according to an article posted on money.cnn.com, is that while low-income households are the most likely to have a hard time making ends meet, middle-income households are increasingly struggling to make rent.
The number of burdened households with an income of $45,000-$74,999 jumped to 21% in 2014 from 12% in 2001.
Many are cost burdened
There isn’t necessarily a quick fix to this dilemma either. According to Harvard’s Joint Center for Housing Studies, experts generally recommend keeping your housing costs around 30% of your monthly income. But the number of “cost-burdened” tenants, those who spend more than 30% of their income on rent, rose to 21.3 million people last year.
And of that number, adds the JCHS, more than 26% are “severely cost burdened” and spend more than half of their income to cover rent.
Don’t rejoice just yet, Realtors
Most real estate professionals reading this may be tempted to use this as a talking point against renting (“it’s not affordable, owning is!”), but remember that as the economy vacillates, even homes for sale are falling out of the affordability range.
What this report truly indicates is that housing, be it for sale or for rent, is taking up more of Americans’ paychecks, but those paychecks haven’t gotten bigger in nearly a decade. No budgeting or selecting different housing changes this fact, and we’re watching the economic indicators for signs of a change, but we aren’t seeing them.