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US rental housing increasingly unaffordable; Half of all renters, about 20.6 million people, are spending more than 30% of their income on rent
Topic Started: 12 Dec 2013, 01:33 PM (527 Views)
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US rental housing increasingly unaffordable, says study

by Dexter Mullins
December 10, 2013 5:45PM ET

People renting apartments in the United States are facing the highest financial burden they have ever faced as a result of the economic recession, driving more people out of the housing market and into rentals, according to a new report from the Harvard Joint Center for Housing Studies (JCHS).

Half of all renters, about 20.6 million people, are spending more than 30 percent of their income on rent. A quarter, 11.3 million, are spending more than 50 percent of their income on rent, forcing them to spend less on food, transportation, entertainment and retirement savings.

“It has never been this bad, we are at record levels,” Chris Herbert, research director at JCHS, told Al Jazeera. "It puts low income people in a real bind. If you don’t have a lot of income to begin with and half of it is going to housing, you don’t have a lot of money left over for anything else.”

The report breaks down the findings across income levels and age groups. The group with the most renters facing a significant cost burden is comprised of renters who make below $15,000 — about the yearly amount of someone earning minimum wage — 83 percent of them are spending more than a third of their income on rent.

According to the report, someone making $15,000 a year would need to find housing that’s only $375 a month to keep costs at a manageable 30 percent of income, a challenge considering only 5 percent of new rental units in 2011 went for less than $400 a month and median rent was $1,000 a month.

But it’s not just the poorest that are affected by the increased burdens.

Renting, something traditionally associated with people in their 20s, has increased in every age group and the pool of renters is only expected to grow. From 2001 to 2011, nearly one in five households headed by someone in their 30s switched from owning a home to renting at some point; nearly one in seven households headed by a person in their 40s did the same.

“People are going to have a hard time making ends meet, and the situation will be dire,” said Lance Freeman, an associate professor of urban planning at Columbia University. “At the same time there have been budget cuts for rental assistance programs. The outlook seems bleak for people of modest incomes. We can only hope that the economy can get better, and policymakers provide more funds for rental assistance.”

Herbert says the source of the problem is two-fold.

First rents "are going up because we’ve had an increase in renters, driving rent prices up,” but a “bigger factor,” he said, is the decrease in renters' incomes.
Tradeoffs

While the median gross rent has increased by 6 percent, median renter income has fallen by 13 percent. Coupled with a lack of affordable housing, people are forced to reduce spending to try and make ends meet.

The single largest source of cutback is food according to JCHS. People decrease their food spending by as much as 40 percent, or about $130 a month, to try and spread their money around.

“There’s cutbacks in terms of health care spending, there’s cutbacks in terms of retirement savings, entertainment, transportation. All these things also have ramifications for those sectors of the economy. It does have not only for the household an impact but for the broader economy as well,” Herbert said.

Over the next 10 years, the rental market is expected to grow by as much as 4 million people, nearly all of them minorities, according to demographic forecasts by the 2010 Census. As the pool of renters continues to grow, the market will have to adapt.

Freeman says if costs continue to increase at the rates they are now, things will only get worse for renters in the toughest of financial situations.

“In some cities where the housing market is really tight, you’ll see increases in homelessness, and people doubling and even tripling up. People who are able to move will move to cheaper parts of the country,” he said.

“In a country like the United States where we put so much faith in the market, it does raise some questions as to whether or not the market will continue to meet the demand for the rental market.”

But not everyone has the same outlook. Herbert says he doesn’t see things getting much worse, but they certainly won’t be improving overnight.

“It’s taken us 12 years to get here, it’s going to take us a while to get back,” he said. “We had a long period of very weak income growth, and certainly at 7 percent unemployment we aren’t going to see robust income growth.”

Read more: http://america.aljazeera.com/articles/2013/12/10/study-rental-housingmoreunaffordablethaneverbefore.html
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