The rent is too damn high, according to a new Pew report
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In 2015, 38 percent of renter households spent more than 30 percent of their gross income on housing, according to a new report released today by Pew Charitable Trusts. The Pew report said high rates of families living in such a precarious financial state threatens the long-term economic mobility of American families, and has implications for the economy as a whole.
“If you’re spending 30, 40, or 50 percent of your income just on shelter, you are absolutely not going to be in a position to consume and contribute to the economy in other ways,” said Erin Currier, director of Pew’s financial security and mobility project.
There are a number of factors that have driven up rents in recent years. During the Great Recession, foreclosures pushed millions of families into the rental market. Meanwhile, the crashing housing market discouraged many Americans from selling their homes, suppressing a supply of new rental properties. Rapidly rising demand for rental properties in the wake of the Great Recession pushed vacancy rates to historic lows, according to the report.
When vacancy rates drop and demand for rental properties increases, rental prices go up. Since 2001, rental price increases have outpaced median household income growth.
That means, many families today spend a higher portion of their income on rent. According to Pew’s report, that imbalance is contributing to high rates of “rent burden.” Pew defines families who are rent burdened as those spending more than 30 percent of their gross income on housing.
Here are some more highlights from Pew’s analysis of rent burdened families:
- 38 percent of renter households (17 million families) were rent burdened in 2015. That’s a 19 percent increase since 2001.
- 17 percent of renter households were severely burdened — meaning they spend over 50 percent of gross incomes on rent in 2015, representing a 42 percent increase since 2001.
- African-American households were consistently more likely to be rent burdened than white households.
- Rent burdened households often have limited savings — 64 percent of them had less than $400 cash in the bank.
- Rent burdened households are less likely to buy homes than those who spend less than 30 percent of their incomes on rent.
Currier points out that the declining rate of families transitioning to homeownership shows that there’s clearly something “problematic” going on. For rent burdened families, Currier said “there’s a bit of a wedge being driven between them and their goals and their achieving of the American dream.”
Click the audio player above to hear the full interview.
This story is part of Divided Decade, a year-long series examining how the financial crisis changed America.
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