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What do New York City, Santa Rosa, Calif., and Boulder, Colo., have in common? They all have expensive rent – so expensive, in fact, that the middle class has been priced out.
Those are just three of 90 U.S. cities where rent has skyrocketed out of reach of middle-income families, The New York Times says, based on a Zillow report.
If you spend 30 percent or less of your household income on rent and utilities, then you’re in good shape. Unfortunately, rent alone in those 90 cities consumes more than 30 percent of the median gross income.
It’s a troubling trend that isn’t expected to go away anytime soon, the Times said.
Nationally, half of all renters are now spending more than 30 percent of their income on housing, according to a comprehensive Harvard study, up from 38 percent of renters in 2000. In December, Housing Secretary Shaun Donovan declared “the worst rental affordability crisis that this country has ever known.”
Fueled by alarmingly low apartment vacancy rates, rents are expected to rise as much as 4 percent this year, compared with 2.8 percent last year, the Times said. Los Angeles is the least affordable city, where median rent gobbles up 47 percent of median income. Miami, College Station, Texas, San Francisco and New York City round out the top five most unaffordable rental cities.
According to USA Today, demand for rentals increased across the U.S. after the housing market collapsed in 2007.
A cascade of foreclosures forced many people out of their homes and into apartment leases. At the same time, construction of apartments was stalled until the last couple of years because many builders couldn’t get loans during the credit crisis.
Add to that several recent trends, from rising mortgage rates to stagnant pay, which have combined to discourage many people from buying homes. It’s resulted in fewer places to lease and a bump up in rents.
High rents have effectively stifled middle-class spending on other goods and services, the Times said. This weighs heavily on the economic recovery, which relies largely on consumer spending.
Low-income families that spend more than half their income on housing spend about a third less on food, 50 percent less on clothing, and 80 percent less on medical care compared with low-income families with affordable rents, according to a new report by the National Low Income Housing Coalition. And renters amass less wealth, even non-housing wealth, than homeowners do.
Have you experienced soaring rental prices where you live? Share your thoughts below or on our Facebook page.