The Escalating Cost of Rental Housing
Housing affordability can seem like a policymaker’s chicken or the egg dilemma. Are lagging incomes pricing increasing numbers of people out of the housing market? Or is a place to live simply on its way to becoming an unattainable luxury good? A report released in December by Harvard’s Joint Center for Housing Studies uses ACS data to examine the increasingly complex nature of the rental housing market.
A household is said to be cost-burdened if over 30% of its household income is spent on housing costs; for rental households this includes the cost of rent and utilities. When a greater percentage of the population rents, high rent becomes a larger issue. According to the Harvard study, renting has recently become an attractive option for potential homeowners unable to afford a home due to the foreclosure crisis and subsequent turmoil in the housing market. Over the past decade, the number of renters increased dramatically in many major cities and suburban areas, a trend the Harvard researchers predict will continue through 2016. The chart below shows the percent of the population in San Francisco, Miami, Detroit, and Chicago who rent their homes, compared to the national average of 33.87%, for 2007-2011.
The lack of affordable rental housing across America is certainly not a new phenomenon, but many are concerned that the problem is becoming more severe. In San Francisco, for example, a wave of outrage has been growing for months over the rising cost of toast and real estate, driven by an influx of highly-paid tech industry workers.
According to the American Community Survey 2007-2011 estimates, 47.7% of American renters were cost-burdened in this time period. For moderate income Americans, geography plays a major role, with renters making less than $50,000 and living in high-cost and/or economically depressed areas faring worse:
When we consider only those earning $20,000 or less, we see that housing is rarely affordable for low-income renters. The researchers at the Joint Center for Housing Studies found that income spent on unaffordable rent would otherwise go to basic needs such as food, transportation, health care, and retirement savings.
Note that due to changes between the 2000 Census and American Community Survey, cost burden measures should not be compared directly between 2000 and 2007-2011.