While many renters have shoulder the high rents as a tradeoff for location or space, it looks as though that burden is only going to increase. Many of today’s renters have to accept high rents due to the lack of inventory to match the demand. For those who can afford to make the jump from renter to homeowner, it seems that now is the time to do.
Those who cannot afford to make that leap are going to find themselves shouldering the high rent burden for even longer. According to a white paper by Enterprise Community Partners and the Harvard Joint Center for Housing Studies, the number of cost-burdened renting households is only going to increase over the next 10 years.
Essentially, the number of renters who are spending 50% or more of their income on rent is only going to rise by 11% before 2025. One of the reasons for this upward spike is the result of a rising adult population that will increase the burdens on a housing market that is struggling to meet current demand. Affordable options are disappearing quickly, as landlords find their properties are more profitable at market rates.
Tax credit options are being utilized to create affordable housing complexes, but government programs such as these are unable to keep up with the demand, particularly in the urban centers. Thus the workforce for restaurants and retail outlets is struggling to maintain housing close to their employment. As they head further afield, the burden of commuting reducing any savings obtained.
It’s a demand – We need more affordable housing units
The paper noted that the U.S. Department of Housing and Urban Development has documented over 11.2 million low-income households competing for 7.3 million units. When the very low-income households of 7.7 million are included in that number, it appears that there are only enough low-income units to provide for a quarter of those in need. That situation will only get worse as developers cater to the luxury and middle class markets, in terms of both amenities and rents.
Programs meant to relieve some of this rent cost burden are finding their resources are inadequate to meet the needs of these households. Yet, this cost-burden is also creeping into the middle class, as they also find themselves struggling with increasing housing costs in a wage stagnant environment, depending on their industry.
Former homeowners are becoming renters
Demand for housing is being created by several groups. One is the former homeowners who have now become renters. Due to still recovering finances, these renters are unable to return to the housing market as homeowners. Newly forming households are another source of demand. Finally, there are those households renting because their low-income status makes it difficult for them to save for a down payment to make the jump into homeownership.
Many feel this is a problem relegated to the large urban and metro centers. But the study pointed out that this is not the case. Rent related cost burdened households can be found through all the states, even in those regions that have been traditionally affordable. Population growth is one of the factors contributing to this trend.
For most renting households, the cost of living is only going up. While population growth plays a part, the lack of affordable housing construction and lingering effects of the recession are also contributing to a rental housing market stacked against the renter, especially those who would be considered low-income. That burden is not expected to lift any time in the near future.