A new report from Harvard’s Joint Center for Housing Studies finds that America’s cities are unaffordable even for renters with incomes of $45,000, making 2014 the record-breaking year for “cost-burdened renters.”
The study defines an unaffordable rent as one that accounts for more than 30% of your income. The authors blame the phenomenon on a combination of factors, an increase in rental properties aimed at the wealthy and population increases, though they don’t address two other likely culprits: stagnant wages and increased deference to landlords in rental policy (for example, weakening of rent controls and easing evictions),
High rents impact the real economy, sucking discretionary income out of circulation, which reduces retail spending, holidaymaking, etc. High rents have a long-term impact on retirement savings, making them into a kind of demographic bomb that’ll detonate in half a century or so.
While the median rental last year was $934, only 10 percent of new rentals in multi-family buildings coming onto the market have rates of $850 or less, while more than a third are $1,650 or higher.
Although Herbert said there could be some relief for middle-income renters once developers saturate the market for pricey properties, in the meantime, they’re stuck. With a growing percentage of their money going towards rent, they have less opportunity to save for a down payment, putting them at the mercy of the rental market for even longer.
They’re also less able to save for retirement, which means that any advances into homeownership they do make could be in jeopardy once they reach their senior years.
But in the more near term, it’s the drag higher rents put on the discretionary spending of these families that has the potential to cause the most economic heartburn.
AMERICA’S RENTAL HOUSING:
Expanding Options for Diverse and Growing Demand [Joint Center for Housing Studies/Harvard University]
It’s Not Just the Poor Who Can’t Make Rent
[Martha C White/NBC]