More than a quarter of renters in the United States have to put half of their income toward paying rent. But that’s not the bad news. The bad news is that things are almost certainly going to get worse.
A new report from Harvard University’s Joint Center for Housing Studies and Enterprise Community Partners Inc shows that in 2013, 11.2 million households who rented, or 26.5 percent of the total, were severely burdened, or their rent consumed more than half of their income. While that’s a slight dip from the record high of 11.3 million reached in 2011, it’s risen by nearly 60 percent, adding more than 3 million people, since 2000. About half of all renters are paying more than the recommended 30 percent of income toward rent.
Those rates are roughly double what they were in 1960.
During this time, rent prices accelerated, thanks in part to a shortage of rental units compared to demand. Between 2005 and 2014, there were just 2.2 million new rental units, the lowest production rate on record, while demand surged by 7.9 million renters. There are more renters now than at any other time in history, but vacancy rates are at the lowest level in two decades. In the face of such intense demand, rents have soared. Between 2002 and 2012, rent increased faster than inflation by 0.22 percent.
And while rents are notoriously expensive in high-cost cities like New York and San Francisco, these problems extend across the country. The share of renters spending more than 30 percent of their income on rent is 40 percent or higher in all but three states, while the share of those spending at least half of their incomes is 20 percent in all by three states.
Meanwhile, incomes haven’t been able to keep up with how much people are spending on housing. Median income, adjusted for inflation, was lower in 2014 than it was in the early 2000s. People making minimum wage can’t afford rent in any state. Far from getting big enough raises to cover the increase in rent, most households are falling further behind.
There are virtually no scenarios, however, under which things improve without a radical increase in income or decline in rent prices.
The number of households that rent is expected to grow between by 4.2 million and 6 million over the next decade. But wages are growing at the slowest rate since 1982. “With substantial growth in renter households expected over the next decade and little sign of a turnaround in the income and rent trends that produced these record levels of cost burdens, there is little prospect for substantial improvement in these conditions over the coming decade,” the authors write.
If current trends hold and rent prices keep outpacing income gains, each 0.25 percent uptick in rents will mean an extra 400,000 households putting half of their incomes toward housing costs, and rents that outpace incomes by 1 percentage point will mean a 25 percent increase in severely cost-burdened renters by 2025, an increase of 25 percent. But even if both rents and incomes grew in line with inflation over the next decade, the growth in renters alone will mean that the number of severely burdened households will rise by 11 percent, reaching 13.1 million by 2025.
Even incomes growing faster than rents won’t make a huge dent. Under the best case scenario that the authors run, where income growth outpaces rent by 1 percentage point a year, the number of households that pay half of their incomes in rent will only decrease 1.4 percent.
The lowest-income Americans could in theory avail themselves of rental assistance programs, but those have come under Congress’s budget cutting knife in recent years. As of the end of last year, about 85,000 fewer families got rent vouchers to cover the the cost than two years before thanks to cuts. Meanwhile, the country spends far more on the mortgage interest tax break, which mostly ends up helping the wealthy.