Over 27% Pay Over 50% their Income in Rent

By Sep 22, 2011, 2:40 PM Author's Blog  

There are some very interesting statistics in this USA Today piece on the rental market.  As Americans’ incomes have dropped (-2.2% adjusted for inflation per ‘official stats’ last year) affordability has suffered some.  If rents increase as they have the past few years, then we have more of an issue. The story has a forecast of a +4% increase in rents – we’ll see if the economy is this poor if that can be pushed through.

More shocking to me was over a quarter of people pay at least 50% of their income in rental costs.  Looking at these stats it is becoming far more favorable on a cash flow income to pay a mortgage than a rent – however of course the upfront costs are the issue there.  Also keep in mind many people with mortgages have refinanced to much lower rates the past few years.

Via USA Today:

  • More renters found housing unaffordable last year as incomes declined, and more are likely to be squeezed this year, given rising rents  .The share of renters paying 30% or more of their household income on housing costs — the government threshold to determine if housing is unaffordable — rose to 53% last year from 51.5% in 2009 and about 50% in 2008, according to 2010 Census data released today.
  • While median rents remained stable last year at $855 a month, median national household incomes, adjusted for inflation, fell 2.2% — putting the squeeze on renter budgets.
  • The share of renter households spending half or more of their income on housing rose to 27.4% last year from 26.4% in 2009, (would have loved to seen what this stat was in 2006, but still a shocking amount) while the share of homeowners with mortgages in the same situation rose to 15.1% from 14.7%, the data show.
  • Last year, 38% of homeowners with a mortgage paid 30% or more for housing. That was up only slightly from 37.6% in 2009, Census data show.
  • The Census Bureau’s definition of housing costs includes mortgage payments, insurance, taxes and utilities.
  • Renters will face higher costs this year, says Stan Humphries, economist for real estate website Zillow.  Nationwide, rents are expected to rise about 4% this year, Humphries says, and will also rise in 2012. Strong demand is driving rents up as homeowners lose homes to foreclosure and become renters. Skittish consumers are also delaying home purchases, given concerns about the economy.
  • The renter household market was fairly stable from 1990 to 2006, McCue says. But since 2006, when housing prices peaked, the number of renter households in the U.S. has grown each year. Last year, the share of occupied housing units that were rented increased to 34.6% from 34.1%, the Census data show.
  • Nationwide, the homeownership rate dipped last year to 65.4% from 65.9% the year before. The rate has been declining since 2006 when it was at 67.3%, this Census survey shows.
  • At some point, lower home prices and higher rents will attract more home buyers, Humphries says. “They will realize they can buy a home for less than it costs to rent,” he says.
  • Already, investors are snapping up homes and converting them into rentals. In August, investors accounted for 22% of existing home sale activity, the NAR says. Cash buyers, who are most often investors, accounted for 29% of sales.

Housing affordability in 2010

Last year, more than a third of owners with mortgages and more than half of renters paid 30% or more of their household income on housing costs.

Source: U.S. Census Bureau

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