As rental demand grows, soaring rents are taking a bigger bite out of households’ pocketbooks. About half of renters spend more than 30 percent of their income on rent, up from 18 percent a decade ago, according to newly released research by Harvard’s Joint Center for Housing Studies. Twenty-seven percent of renters are paying more than half of their income on rent. “We are in the midst of the worst rental affordability crisis that this country has known,” says Shaun Donovan, U.S. Secretary of Housing and Urban Development.
Rising rents mixed with a stunted wage growth has created an affordability problem, the study notes. Between 2000 and 2012, real median rents rose nationwide by 6 percent. However, over that same time period, the real median income of renters fell by 13 percent.
A shortfall in affordable units is particularly troublesome as low-income renters struggle to find a place, the study notes.
“Over four years, [there’s been] a 43 percent increase in the number of Americans with worst-case housing needs,” says Donovan. “Let’s be clear what that means: They’re paying more than half of every dollar they earn for housing.”
Young professionals are also turning to renting and finding higher rents to be a hurdle to getting ahead. Many have plans for home ownership one day: Nineteen out of 20 people under the age of 30 say they intend to buy a home in the future.
“There is no question that the will toward home ownership remains there — [the problem is] the way,” says Eric Belsky, director of Harvard’s Joint Center for Housing Studies. However, rising home prices and mortgage rates, high student loan debt, and tightened credit is holding many back and forcing them to continue to rent.