Rents are growing faster than incomes in many parts of the U.S., squeezing household budgets.
While some of the rise is attributable to a boom in the luxury market, costs also are climbing for the poor and working class. Unfortunately, wages haven’t been able to keep up.
“While long a condition of low-income households, cost burdens are spreading rapidly among moderate-income households,” a recent report by Harvard University’s Joint Center for Housing Studies said. “Much to their detriment, cost-burdened households are forced to cut back on food, healthcare, and other critical expenses.”
Renters on the West Coast are feeling some of the greatest pressure, led by Los Angeles and San Francisco.
But some mid-tier cities also are experiencing steep rent increases. Denver, Austin, Texas and Portland, Ore., for example, long had relatively affordable housing. But now rents are pushing well above 30% of median income. Other cities, such as Charlotte, N.C., remain affordable despite rapid price increases.
Economists generally consider a household cost-burdened when it is paying at least 30% of its income for rent.
Online real estate database Zillow tracks affordability in scores of U.S. cities. Svenja Gudell, senior director of economic research, said the mismatch between robust growth in rents and more tepid gains for income has created obvious problems for affordability.
“Strong rental demand, coupled with limited new rental supply and still-underwhelming wage growth, has only exacerbated the problem in recent years,” Ms. Gudell said. “Meaningful growth in wages and a healthy dose of new rental units coming on line will help ease the crunch, but neither will happen overnight.”
The table below, using Zillow data, shows rental costs as a share of median household income in the first quarter.
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