CAMBRIDGE, Mass. (12/15/15)--If lenders are looking for more evidence as to why first-time homebuyers have yet to enter the market, here it is: Nearly half of all U.S. renters struggle to make monthly rent payments, according to a recent study from Harvard University’s Joint Center for Housing Studies.
In fact, the number of “cost-burdened” tenants, or those who spend more than 30% of their income on rent, climbed to 21.3 million people last year, the “America’s Rental Housing” report found.
Furthermore, of those who can’t afford their rent, more than 26% are considered “severely cost burdened” and spend more than half of their incomes on rent (CNNMoney.com Dec. 14).
The disparity between wage growth and rent growth has exacerbated the problem for many renters, the report found.
Inflation-adjusted rent climbed 7% between 2001 and 2014, while household incomes fell 9% over that stretch. Adding to the problem, demand for rental units continues to expand, keeping the vacancy rate pinned to a 30-year low and fueling higher prices. (See related story: SFFCU 0% mortgage opens door to Bay Area homeownership)
The median rent payment last year rose to $1,372, a 26% increase from 2012.
“These trends have led to record numbers of renters paying excessive amounts of income for housing, with little prospect for meaningful improvement, the report said (CNNMoney.com).
It might come as no surprise that low-income households have the most difficult time paying their rent each month. But middle-income households have felt the strain as well.
According to the Harvard report, 21% of middle-income households are considered burdened, a jump from 12% in 2001.