Report: Housing Costs Pinch 21.3M Renters

A record high number of American renters — about 21.3 million — are devoting 30 percent or more of their income to paying rent, according to the annual State of the Nation’s Housing report from Harvard University’s Joint Center for Housing Studies. Most financial experts say consumers shouldn’t pay more than 30 percent of their monthly income for housing costs.

Rents, however, have been rising faster than wages for years now. “When you have to dedicate such a high proportion of your income to rent every month, it forces you to make difficult decisions,” says Dan McCue, a senior research associate at Harvard’s Joint Center. “It means spending less on essentials like food, clothing, and health care, as well as less opportunity to save for a down payment on a home or plan for retirement.”

Source: Harvard University’s Joint Center for Housing Studies and “11 Million Americans Spend Half Their Income on Rent,” CNNMoney (June 22, 2016)

Why Home Renters May Be in Trouble

The gap between rental costs and household income is widening to unsustainable levels across the country. As more renters face steeper costs, it may put them even further away from home ownership, according to the National Association of REALTORS®. NAR evaluated income growth, housing costs, and changes in share of renter and owner-occupied households over the past five years in metropolitan statistical areas.

Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, according to research in a new study just released.

“Current renters seeking relief and looking to buy are facing the same dilemma: Home prices are rising much faster than their incomes,” says Lawrence Yun, NAR’s chief economist.  “With rents taking up a larger chunk of household incomes, it’s difficult for first-time buyers – especially in high-cost areas – to save for an adequate down payment.”

“The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year,” according to NAR’s study.

Source: National Association of REALTORS®