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A recent report shows that one in three Americans is spending too much on rent. In housing markets across the nation, rent is becoming quite unaffordable for Americans. According to a report by RealtyTrac, in the current household market, Americans have to pay over 30% of their pay check or monthly median income on rent for three-bedroom homes. This is much higher than the conventional threshold for affordability. In some cities, the percentage of the monthly income spent on rent is much higher.
Urban areas feeling the pinch
The best example to show how rent prices have increased is the Bronx. In this New York City borough, a typical household uses about 66% of its monthly median income to pay for rent for a three-bedroom house. This is the highest percentage of salary used for rent in all US counties according to the same report. The Bronx is home to some of the poorest communities in the country with the overall median income being less than $35,000. However, the average rent price here is almost $1800 per month, which is very high.
This is also the case in other urban areas like Brooklyn, Philadelphia, Miami and Baltimore where there is a sizeable population of low-income residents. In these areas, renters are paying about 50% of their monthly income to cover rent prices.
Renters are being prevented from becoming homeowners
It comes as no surprise that renters are unable to save enough or do not have the financial ability to pay for or to buy a home. Ironically, the economic or foreclosure crisis caused many people to become renters and years of economic instability has kept many renters form becoming homeowners and leaving their rental properties. This is according to a study by the Joint Center for Housing Studies at Harvard.
These reasons led to a huge rise in demand for rental properties and this in turn pushed rent prices up by over 21% since 2006. In another blow to renters, real income has also fallen. Real income is the actual income after inflation has been taken into consideration, and over the last six years, it has fallen by 14% according to the Director of the Housing Studies Center at Harvard – Chris Herbert.
High rent is keeping people back
Not only are renters giving up on their dreams to become homeowners, but about one in four renters is spending over 50% of their income on rent – according to a report by the Center. This is forcing many renters to make severe budget cuts that would otherwise be spent on healthcare, retirement and food.
Moreover, according to the Managing VP of Community Development at Capital One – Laura Bailey, unaffordable housing and resulting financial problems prevents people from advancing their careers and from pursuing higher degrees. They are also unable to save enough to make down payments on a home and this vicious cycle forces them to remain in rental properties. According to her, when housing becomes affordable, people can focus on improving their lives and careers and ultimately become more productive.