I’m a long-term renter, largely for reasons out of my control, which is the vagaries of academia, including having a spouse who lives several hundred miles away. I would like to buy at some point, but it’s not really feasible given the general life instability. But rental prices in Providence have really skyrocketed over the past few years. It’s nothing I can’t handle, but I’m not exactly getting rich either. If I am noticing rising rents, how are the many, many people with more tenuous incomes than I dealing with it. The answer is, not well.
Renters who earn the least cannot afford even the cheapest market-rate rentals in the nation’s largest metro areas, according to a Zillow® analysis of multifamily rents and Census income data.
The rent affordability crisis is especially tough for the lowest-earning Americans. A common rule of thumb is that people shouldn’t spend more than 30 percent of their income on housing, allowing them to save for emergencies and afford other expenses. In the largest 25 metros in the United States, the typical rents require a much larger share than that recommended amount for renters whose incomes fall into the bottom third of the income distribution, even when they are looking at the cheapest apartments on the market.
Spending such a significant portion of income on rent means making other financial sacrifices. Putting aside money for an emergency is a luxury many renters don’t have – 68.8 percent don’t have enough savings to cover three months of living expenses. Instead, the main financial concern for most renters is affording basic bills, like food, utilities, and gasoline, in addition to the renti.
From 2011 to 2016, rents increased much more than incomes did, and this is especially evident at the lower end of the market. Even in markets where lower incomes saw significant gains, rents in those markets saw much bigger jumps. For example, the monthly earnings among the lowest third of incomes in San Francisco increased by about $485 between June 2011 and June 2016, but over that same time period, apartment rents grew $1,145.
This is a major social problem that few people take seriously enough. Even on the left, there is massive disagreement on urban housing policy, often between NIMBYesque homeowners and density advocates, but it’s really more complicated than that because you have all the density you want but if it the new housing is mostly for the high-end market, it’s not going to help much. Moreover, with the profits so much higher for developers in that market, they are mostly all going to try and go for that housing over low-end housing. There would need to be a major government investment in affordable housing and that has just not been the case for a very long time. The inability of the poor to live in the cities is a real urban crisis.