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Rent Affordability Drops As Incomes Fall

While stock market values soar, executive bonuses rise and big corporations continue to shelter massive profits the fate of many renters continues to decline: a new study by the Center for Housing Policy shows that one-in-four tenants now spend at least half their income on rent.

The big question raised by the report is just how long rental expenses can continue to rise while incomes continue to fall.

“Median household income,” according to the Census Bureau, “was $50,054 in 2011, 1.5 percent lower in real terms than the 2010 median, 8.1 percent lower than the 2007 (the year before the most recent recession) median ($54,489), and 8.9 percent lower than the median household income peak ($54,932) that occurred in 1999.” (parenthesis theirs)

2013rentalchart

A new report from the Center, a part of the National Housing Conference, shows that “working renters saw their housing costs rise by 6 percent from 2008 to 2011, while their household incomes fell more than 3 percent.”

In comparison, those who owned saw an effective decline in housing expenses as interest rates, property taxes and homeowners insurance premiums have generally fallen. This happened because the Federal Reserve has forced down interest rates and lower property values since 2007 also mean declining property taxes and reduced property insurance bills because both expenses are based on home values.


“While the economy pushed both owners’ and renters’ incomes down, the shift away from homeownership is pushing rents up due to increased demand, said report co-author Maya Brennan. “What we’re seeing with the rental market is not explainable by population trends alone—it clearly reflects the movement of former homeowners into rentals as well as delays in home purchases by current renters, but this increase in rental demand has not been matched by an increase in supply. This imbalance leads to rising rents in markets across the country.”

Major findings from the report, entitled Housing Landscape 2013, include:

___ Nearly one in four working households spends more than half of its income on housing. The share of working households with a severe housing cost burden increased significantly between 2008 and 2011, rising from 21.8 percent to 23.6 percent.

___ Declining incomes have exacerbated housing affordability problems for working renters. The median housing costs of working renters rose nearly six percent between 2008 and 2011 while their median incomes fell more than three percent.

___ Severe housing cost burden was most preva­lent among working households earning less than 30 percent of area median income (AMI). Eight in ten working households earning less than 30 percent of AMI (but working an average of at least 20 hours per week) were severely burdened in 2011, a much higher share than for other income groups. Increases in housing cost burdens occurred primarily among working households with incomes at or below 50 percent of AMI, but even some working households earning between 51 and 120 percent of AMI are faced with severe housing cost burdens.

For more, see: Housing Landscape 2013

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