What does rent burdened mean?
In 2015, 43 million families and individuals lived in rental housing, up nearly 9 million from 10 years earlier. Nearly 11.2 million Americans were severely rent burdened, spending more than 50% of their income on housing. 50% of all renters are moderately burdened by their rents. Wages are not increasing at the same rate as housing costs, and rents continue to increase, thus making rent a major burden for families and individuals.
Who makes up this group of rent burdened Americans?
Rent burdened Americans mostly include minorities, elderly, and millennials, and others who have not fully recovered from the recession. Those that cannot afford rent have been pushed into homelessness. Half of the homeless population in America do in fact work; however, they still do not make enough money to pay for housing.
On the flip-side, what is affordable housing?
Housing that does not cost more than 30% of a person’s income, according to HUD.
Why are so many Americans now renting?
The housing bubble burst played an important role, when 8 million homes were foreclosed. Wages and income have fallen to levels similar to that of 1995. There has been a tightening of access to mortgage credit. All these factors combined have made homeownership difficult for many families and individuals.
Renting does have its benefits, which Americans have embraced. Lower moving costs, less financial risk, and less property maintenance responsibility and expenses are a few of the reasons people choose to rent versus own.
Millennials are now choosing to wait until much later in life to marry and have kids which is another contributing factor to renting.
Why are more rental units or homes not available or affordable?
Multifamily construction is booming, but is mostly targeted toward high end renters. Developers are finding it more and more difficult to construct affordable housing in many cities. Offering units at a lower rent does not cover the costs incurred for construction. Developers face increasing costs related to zoning restrictions, parking requirements, and height limitations. They also face legal battles with neighborhoods that oppose new construction and extended review processes that all add to their costs.
What is the outlook?
Unfortunately, these rates are expected to rise. The severely rent burdened are predicted to increase to 14.8 million by 2025.
What can be done?
Helping individuals and families make more money though increased wages, education, and job training could help. More federal housing subsidies for lower-income renters and/or financial incentives for builders to create affordable housing units could all be helpful to the rent burdened America.
Source: Harvard Joint Center for Housing Studies