When it comes to renting, for many people it is the only solution. Unfortunately, over the past 50 years, the cost of rental property have skyrocketed, whereas the renter’s income hasn’t grown nearly as much.
In light of the foreclosure crisis, renting has become a much more desirable way to live. 36% of Americans choose to rent instead of owning their home. This is the highest amount of people taking this route since the 60s. And because the cost of rental properties continues to increase, they are paying as much as three times as much as they should be paying, simply because they don’t see an increase in their pay to reflect the rising rental market.
The director of data science for Apartment List, Andrew Woo, talks about how the service that was used in the 60s as a baseline chart to show the median cost of rental property, it shows how the two (rent and income) have increased through the years until 2014.
Although the cost of rental property have gone up at a faster rate than a person’s income in each decade (the exception being the 90s), it’s only until recently that the gap between the two has become so much different. From 2000 and 2010, people’s income has fallen by 7 percent, whereas rent continued to rise by 12 points. While the cost of rent has been a bit slower since the turn of the century, there has been a slight increase in income—although not nearly enough to make much of a difference.
In big coastal cities like Los Angeles, New York, San Francisco, that have a tight housing market, they are always being called out for their astronomically high cost of rental property. Surprisingly, these places aren’t the only ones that are experiencing this kind of difference. In cities where the rent has typically been considered cheaper, a place like St. Louis or Detroit, the income has dropped, thus making the rent feel high.
Be that as it may, there are some instances where rent and income have increased at a similar pace. If you live in Austin, Phoenix, or Las Vegas, you aren’t quite as affected by the increasing cost of rent because you’re earning more than you used to.
This chart shows a breakdown of each city, and it shows exactly why the populace is struggling to pay the rent, even though they live in areas that are considered to be affordable. To be considered in an affordable rental market, your rent should be 30% (or less) of a household’s income on a monthly basis. When your rent exceeds that percentage, it is considered to be a cost-burden, and it tends to leave families struggling in other areas like groceries, health care, and even savings.
According to a report given by Harvard last year, it doesn’t seem like the cost of rental properties will be leveling out anytime soon, either.