Time to buy a home

Lack of Affordable Rents Reaches Crisis Level, Study Says

An “affordability crisis” has hit the U.S. rental market in the past decade, with a skyrocketing increase in the number and percentage of renters who must decide between paying for a place to live and other necessities, according to a new national study.

The study by the Joint Center for Housing Studies at Harvard University, released Monday, details just how tough the housing market has become for many renters.

“The gravity of the situation for the large proportion of renters spending so much of their incomes on housing is plain,” said Eric Belsky, the Joint Center’s managing director. “We are losing ground rapidly against a chronic problem that forces households to cut essential spending. With little else to cut in their already tight budgets, America’s lowest-income renters with severe cost burdens spend about $130 less on food each month, and make similar reductions in healthcare, clothing, and savings. And while many choose longer commutes to lower their housing costs, the combined cost of housing and transportation means even less remains for other expenses.”

The wave of foreclosures since 2008 and fallout from the Great Recession forced many former homeowners into the rental market. The renter share of all U.S. households climbed from 31 percent in 2004 to 35 percent in 2012, bringing the number of renters to 43 million by early 2013, according to the study, which is released every other year. The 2000s marked the strongest numerical growth in renter households in the last 50 years, with about 3 million existing homes switching from owner to rental occupancy from 2007-2011 alone, the report said.

“For many low-income families, the rental housing affordability crisis is like a game of musical chairs in which there is never a chair left for them,” said Chris Herbert, the Joint Center’s research director. “The shortfall in the number of units affordable to extremely low-income renters in the U.S. (those earning no more than 30 percent of the area median) more than doubled from 1.9 million in 2001 to 4.9 million in 2011. The situation just keeps getting worse. Assistance efforts have failed to keep pace with escalating need, undermining the nation’s longstanding goal of ensuring decent and affordable housing for all.”

The study found that currently half of all renters spend more than 30 percent of their income on housing, the traditional measure of affordability — an increase of 12 percentage points over the decade. And renters who are “severely cost-burdened” — spending more than half of their income  on rent — increased 8 percentage points to 27 percent, according to the study.

“These levels were unimaginable just a decade ago, when the fact that the severely cost-burdened share was nearly 20 percent was already cause for serious concern,” the study’s authors said in a statement.

Between 2000 and 2012 real median rents nationally (adjusted for inflation) increased by 6 percent, while over the same period the real median income of renters dropped by 13 percent, the study determined.

In an alarming sign for baby boomers, the study found that the segment of renters most affected by the rising costs are 45-to-64 year-olds. From 2001 to 2011, that demographic saw a 30 percent increase in the number of people facing either a moderate or severe burden in their monthly housing cost.

Slicing the data by household income, rising prices hit the lowest income bracket the hardest. For people with incomes below $15,000 per year, there’s been a 24 percent increase in renters facing a burdensome cost with their monthly lease.

Rising costs are being felt most acutely in areas where the job market is hottest. The study cites Austin, Houston, San Francisco, and San Jose as four areas where rental prices continue to soar.