Report: U.S. rental rates on the rise as incomes drop
Prices increase while incomes sink
December 12, 2013 11:21 PM
Dollar house. Home for rent or sale Original Filename: moneyhouse.jpg
By Tim Grant / Pittsburgh Post-Gazette
Escalating rental rates combined with significant erosion of renter incomes have created a situation where, for the first time, more than half of all U.S. renters spend more than 30 percent or more of their income on housing, according to a report from the Harvard Joint Center for Housing Studies.
"America's Rental Housing: Evolving Markets and Needs" found that the mounting problems renters face come at a time when the share of Americans who rent is rising, as is the amount of money they pay for rent. It also points out that between 2000 and 2012, the real median income of renters has dropped by 13 percent.
"When households are forced to spend more than half their income for housing, they have to cut back somewhere else," said Chris Herbert, research director for the Harvard Joint Center for Housing Studies in Cambridge, Mass. "The disturbing finding is the main place they are cutting back on spending is food. They also are cutting back on health care spending and retirement savings."
Back in 1960, he said, only 25 percent of renters paid more than 30 percent of their income for rent.
The tidal wave of foreclosures that hit the U.S. after the 2008 housing crash played a big role in displacing millions of homeowners and reversing the long upward trend in homeownership. High rates of unemployment also have forced many former homeowners and those would-be buyers who cannot afford homeownership to turn to the rental market.
"Rental living often conjures up images of single people and unrelated roommates," the report said. "Singles are indeed the most common type of renter, reflecting both their growing share of all households and the fact that renting often suits their need for less space at a lower cost.
"But contrary to the stereotype, families with children account for nearly as many renters as single persons. In fact, the share of families with children among renters is higher than the share among owners."
People at all income levels rent. But renters' incomes are disproportionately low.
Nearly half (46 percent) of renters have incomes below $30,000, including 22 percent with annual incomes below $15,000 -- which is roughly equivalent to earnings from full-time work at the minimum wage. By comparison, only 30 percent of all households have incomes that low.
For a renter with $15,000 in annual income to spend less than 30 percent of his or her income on housing, he or she would need to find rent that costs no more than $375 a month.
As the number of low-income renters has grown, the likelihood of finding quality, affordable units has diminished.
In 2011, 11.8 million renters with incomes of about $19,000 competed for just 6.9 million rentals affordable at that income cutoff -- a shortfall of 4.9 million units.
"The other issue to look at is a tradeoff between housing quality and what is affordable," Mr. Herbert said. "If low-income renters find something they can afford, it is usually in rundown condition. The challenge for landlords, too, is if the rent is low, they can't always afford to make improvements."
Tim Grant: email@example.com or 412-263-1591.
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