Now, years later, we can breathe somewhat easier knowing that the economy is strong. However, the markets are still adjusting, especially when it comes to wages and rent. This continues to impact low- and middle-income individuals and families.
Here’s what you need to know:
Many Americans are renters.
According to the most recent census data, the national homeownership rate is 63.5 percent. That figure might sound a little high to some folks, as homeownership rates vary pretty widely by region. (For example, the rentership rate in Los Angeles and New York is more than 10 percentage points higher than the national average.)
But, no matter where you live or how you look at the data, more than a third of U.S. residents rent. In order to understand how this portion of the population is doing economically, we must understand how wages and rental costs are changing over time.
Many workers spend a high percentage of their income on rent.
A new report from the real estate brokerage Redfin found that rent prices have risen 66 percent since 2000, while wages have only increased by 35 percent. As a result, one in four renters spent 50 percent or more of their income on rent in 2015. Also, more than half of all renters in the U.S. were considered cost-burdened in 2015, meaning they spent more than 30 percent of their income on rent.
Affordable housing options aren’t meeting the needs of the population. The National Low Income Housing Coalition found that for every 100 families who are considered “extreme low-income” — meaning they earn less than 30 percent of the median income in their area — only 31 affordable units are available. For folks below the 15 percent median income mark, the situation is even more dire, with only 17 units available per 100 households.
Per the report:
Severe housing cost burden is a risk factor for housing instability and homelessness. With a stretched household budget, a trip to the hospital or a car repair can spell financial disaster, edging a family closer to eviction. Housing instability can cause significant disruptions for family members, such as children’s education and health care treatment for individuals with chronic illness.
It’s hard to come by accurate data on eviction rates. According to the report from Redfin, the Census Bureau plans to start tracking these statistics in 2017. For now, we mostly have local-level data. The authors of the report did utilize the national data that was available. They estimated that in 2015, approximately 2.7 million Americans faced eviction.
Wages haven’t risen nearly as much as rent prices have in recent years, and the outcome is an overwhelming housing burden. To make matters worse, real wages have declined 7.4 percent since 2006. (Meaning that today’s paychecks buy 7.4 percent less than they did prior to the recession.) This problem won’t be easy to untangle. The authors suggest different approaches in different regions of the country. They also warn against the consequences of not turning things around:
Without an expansion in policies to address the affordable housing shortage and the increase in cost-burden renters, evictions will become an even more prevalent feature of the U.S. housing market.
Want to compare your metro area’s cost of living with another city’s? Try PayScale’s Cost-of-Living Calculator.
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