Tags: Harvard | Rents | Housing | Affordable

Harvard Study: Rents No Longer 'Affordable' for Most Americans

Friday, 18 Apr 2014 07:00 AM

By Michelle Smith

More Americans are renting but fewer are finding it affordable.

By common definition, "affordable" housing should consume no more than 30 percent of a household's income, including utilities. But most renters can no longer live by this standard as rents are steadily rising.

In early 2013, 41 million U.S. households were renting. More than half were “cost-burdened” — or paying rent that consumed more than 30 percent of their budgets, revealed a report from Harvard University.

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And the problem of soaring rent isn't limited to the usual high-cost cities, The New York Times reports.

In 90 cities, the median rent — not including utilities — is more than 30 percent of the median gross income, according to an analysis from the real-estate website Zillow commissioned by the Times.

In New Orleans, for example, rent as a percentage of income is double the historical average, having increased to 35 percent from 14 percent, the Times reports.

As the number of renters grows, competition for rental space pushes the costs increasingly higher, but wages, in many cases, have headed in the opposite direction.

In Riverside County, Calif., median annual rental costs have increased $756 during the past six years, but the median household income has fallen in each of those years, Congressman Mark Takano wrote in a rental report earlier this year.

In the City of Riverside, he added, 51 percent of households have been spending more than half their income on rent since before the recession hit in 2007, but their wages remain below pre-recession levels.

Smaller paychecks and tight-fisted lenders makes it more difficult, if not impossible, for many Americans to become homeowners. But after housing prices fell during the economic crisis, it created a prime opportunity for investors to swoop in and snap up real estate at bargain prices, and often in cash.

The prevalence of investors in the rental market creates risks and adds additional challenges, such as lack of competition for rental prices and lower housing availability, said Takano.

Apartment-vacancy rates have dropped so low that forecasters at Capital Economics, a research firm, project rents could rise, on average, as much as 4 percent this year, the Times reports.

In many cities, such as Miami, there is a prevalence of upper-income renters who are able and willing to pay these soaring rents. That demand is also helping to price the middle-class out of the rental market.

To cope, a growing number of working-class professionals are finding it necessary to live with their parents or double up with roommates, the Times reports.

All this is occurring at a time when money from housing-assistance programs is drying up, but is desperately needed.

Riverside County, for example, has 50,000 applicants for its Section 8 housing assistance program; only 8,500 are currently receiving assistance, notes Takano.

We're in the midst of “the worst rental affordability crisis that this country has ever known,” the Times reported Housing Secretary Shaun Donovan declared in December.

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