A report from Harvard University’s Joint Center for Housing Studies has revealed that a huge number of Americans will struggle to pay rent this month.
Financial Strain on Tenants
The report said that 50% of all US tenants spend over 30% of their income on rent and utilities.
Middle-Income Renters Under Pressure
Even middle-income renters find themselves with a 5.4-point surge in the percentage of income spent on housing from 2019 through 2022.
Soaring Housing Unaffordability
Researcher Sophia Wedeen said, “Over the last two decades, housing unaffordability has been scaling the income ladder and increasingly affecting middle-income households,” followed by, “For people with lower incomes, housing unaffordability is a fact of life.”
Inescapable Reality for Lower Incomes
The report noted that unaffordable housing is an “inescapable reality” for those with lower incomes.
Severe Financial Burden
22.4 million households are paying more than the recommended 30% of their income towards housing, with 12.1 million labeled as “severely cost-burdened.”
Two-Decade Rent Escalation
From 2001 to 2022, the report found that rent surged by 21% when adjusted for inflation, significantly outstripping the meager 2% growth in renters’ incomes.
Dearth of Affordable Rentals
The escalating costs are due to the lack of affordable housing as landlords now set prices beyond the means of low-income renters.
Plummeting Homeownership Rates
The number of 25- to 45-year-olds that own a home is the lowest it’s been since 1980, which is why rentals have become more popular.
Sacrifices for Shelter
Numerous renters report making sacrifices in essential areas such as food and healthcare to navigate the escalating cost of rent.
Surging Homelessness Rates
The rising cost of renting means more people are tragically becoming homeless, including both living on the streets and sofa surfing.
Job Growth’s Impact on Rents
Regions experiencing robust job growth, like California, New York, and Washington, are also dealing with the highest rents due to limited housing availability.
Insufficient Pay for Housing
Real estate and finance expert Andrew Lokenauth said, “Many jobs don’t pay enough for people to rent decent places near their work,” and “Not enough new apartment buildings are being built for lower and middle incomes.”
Rental Affordability Conundrum
Earlier this year, a report by Intuit Credit Karma disclosed that 24% of renters couldn’t afford their rent.
Generational Rental Hurdles
Gen Z faces pronounced challenges, with 31% living with parents and 27% unable to afford rent.
Cross-Generational Compromises
Gen Z isn’t the only generation affected, with 42% of Gen X and 25% of Baby Boomers sacrificing their essential purchases in order to afford their rent.
Persistent Doubts about Homeownership
46% of all Americans are unsure whether they will ever have the possibility to own a home if the market stays the same.
Signs of Rental Improvement
Although the report revealed some worrying statistics, there are glimpses of improvement as rents only grew by 0.4 percent in the third quarter of 2023, a stark difference from the 15.3 percent surge experienced by renters in early 2022.
Aging Rental Units
Rental homes are aging significantly; the typical rental unit is 44 years old in 2021.
Increase in Rental Supply
In a positive development, approximately 436,000 new apartments and units were added in the third quarter of 2023, marking the highest amount in 35 years and potentially signaling a slowdown in rent increases as the supply increases, providing renters with more options than before.
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Featured Image Credit: Shutterstock / Wandering views. The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
