An Exorbitant Number of People Spend Over Half Their Income on Rent
5:30 pm, June 27th | by Grace Rasmus
The current state of the housing market is better than it has been in years, with home prices up 12 percent in the last year and sales up 20 percent in 2012. Home improvement construction spending has also put a good amount of money back into the economy.
Yet, according to the Harvard University Joint Center for Housing Research’s annual report, while these stats are good for homeowners, things are really bad for renters. Rental prices are soaring and homeownership has gone down for the eighth straight year. As of late, the number of people facing “severe cost burdens” for rent payment has soared by the millions.
A common rule of thumb is to spend one-third of total pre-tax income on non-discretionary spending. In 2011, 17.9 percent of households were spending over 50 percent of their pre-tax income on housing.
The statistics are (unsurprisingly) even worse for lower-income families. Nearly seven out of ten households with an annual income of less than $15,000 (roughly equivalent to earning year-round minimum wage) were spending most of their income on housing payments. These low-income renters are spending about two-thirds as much money on food, half as much on clothing, one-fifth as much on healthcare, and half as much on pensions and retirement as similar families living in houses they can afford.
The final kicker? Since the number of extremely low-income renters has increased by over 2.5 million since the economy crashed in 2007, there are currently almost twice as many of these renters as there are housing units affordable enough for them to rent.