Rent-Burdened American Families
Demand for rental properties has increased across age and socio-economic groups since 2008. Recent research indicates that although some of those increases can be explained by population shifts, a significant portion is the result of declines in homeownership since the Great Recession. And this means that more American families are rent-burdened
As more households rely on renting for their long-term housing needs, theyre finding the cost of renting increasingly difficult. The steadily rising demand for rental properties over the past decade has reduced vacancy rates to near historic lows, fueling a rapid increase in rental market prices that have outpaced household incomes for many families.
This imbalance is contributing to high rates of “rent burden,” — which for the purposes of this analysis, is defined as spending 30 percent or more of pretax income on rent.
Rent-burdened households have higher eviction rates, increased financial fragility, and wider use of social safety net programs, compared with other renters and homeowners. And as housing costs consume a growing share of household income, families must cut back in other areas.
This logically results in higher debt carrying by those households, due to greater use of credit cards. It’s an almost unbreakable cycle in some cases, making the transition from renting to owning a very difficult proposition.
For example, fewer rent-burdened households transitioned from renting to owning in 2015 than in 2001. Households that were rent-burdened for at least a year were less likely to buy a home than those that never experienced a rent burden.
Rent-burdened families are financially insecure in many other aspects of their lives, too. They often have trouble meeting basic consumption needs, frequently rely on public assistance and typically have little connection to the banking system and limited savings.
In general, renter households have less money across their financial accounts than do non-burdened families and those that own their homes. In 2001, half of the rent-burdened households had less than $10 in savings. By 2015, the savings of non-burdened renter families had increased to slightly more than $1,000 at the median and that of owner households had nearly doubled to $7,000. But rent-burdened households still had less than $10.
The answer to all of this is clear, “save more, spend less on rent.” But that is much easier said than done.
A big part of this problem has to do with a lack of financial literacy, as well as socio-economic stresses in certain sectors — not to mention this: If you find that you’re in a rental home that costs too much, where do you go? Move in with family or friends? That’s certainly an option and a viable one that many have turned to who are suffering under the burden of high rents.
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