Grim News, Renters: Brace for Market That’s Even Worse

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People are spending more of their money on rent. (Photo: iStock)

It’s a bad time to be a renter in the U.S. — but not as bad as it’s going to get, especially for minorities, millennials and the elderly.

A new report says the U.S. now has more renters and fewer homeowners than it’s had in decades, and the number of “severely burdened” renters — those whose rents eat up more than half their incomes — could increase 25% over the next ten years to 14.8 million. In 2013, the last year figures were available, the number was 11.2 million.

The report was compiled by Enterprise Community Partners, an affordable-housing nonprofit group, and Harvard’s Joint Center on Housing Studies (h/t Bloomberg News). Even under the study’s rosiest scenario, the number of cost-burdened renters would decline only by a minuscule 1.4 percent, still leaving millions of Americans barely able to afford housing.

And it’s not just a big-city problem that affects people in New York, San Francisco, Los Angeles or other cities with notoriously high rents. The report says “moderately burdened” renters (those who pay 30 percent or more of their income for rent) make up at least 40 percent of the rental population in every state in the United States except for three.

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New study finds rent’s taking up an increasing size of Americans’ income. (illustration: iStock)

The report attributes several factors to the rent crunch. One is a lingering hangover from the Great Recession; homeowners who lost their homes to foreclosure haven’t bought another home. Plus, mortgage lending requirements remain tight, keeping many from buying homes. And continued economic uncertainty has kept many working people from assuming the potential risks of homeownership.

Making matters worse, rental vacancy rates are at their lowest level in two decades, leading rents to soar.

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Making matters worse: construction of new rental property has slowed, leading to low vacancy rates and higher rents. (Photo: iStock)

The rent crunch cuts across a number of demographics. The report says about 25 percent of both African-American and Hispanic households were “severely housing-cost burdened” in 2013, compared with less than 20 percent of white households. Millennials, who tend to earn lower wages and experience higher unemployment, are likely to rent for longer periods. The elderly, 30 percent of whom already qualify as “severely housing-cost burdened,” also are expected to face heavy rent burdens in the coming years.

Generation Xers and younger Baby Boomers aren’t exempt, either. With fewer working years left to make up for recent economic losses, they’re expected to also face housing problems, according to the report.

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Homeownership is at historic lows, leading to vastly more renters. (Photo: iStock)

What’s the solution? The report finds it unlikely that incomes can increase by enough to keep pace with rising rents.

“The economy alone is not going to solve this problem,” said Enterprise Community Partners’ Andrew Jakabovics, according to Bloomberg. “It brings us back to the need to expand affordable housing."

With no one expecting a mass focus on affordable housing anytime soon, it looks like the U.S. rental market faces a bleak future.

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