Americans Are Rent Burdened
The average renter in the US is now rent burdened, according to a new report from Moody’s Analytics. This means that the typical renter pays 30% of the median household income on rent, a number which has gone up substantially in the past few years. The “rent burdened” definition comes from the United States Department of Housing and Urban Development, which states that households that are rent burdened may have trouble affording other basic necessities, such as food and transportation.
These figures are up from previous years, as in 2019 where the rent to income ratio was 27.2%. It would later drop in 2020 to 25.7% due to less demand from Covid-19, but now with inflation and said demand coming back, people are spending more of their income on rent now more than ever.
During the Pandemic, many major cities saw a decrease in their populations due to lockdowns and remote work. This led to major shifts in populations as people moved out to find homes with more space. As cities have recovered from the pandemic though, demand has skyrocketed back up and now we have seen a reverse of what happened in 2020. In New York city for example, the rent to income ratio is at a staggering 68.5% - the highest in the country.
Another reason for increased rent prices is the lower supply of housing. Between 1968 and 2008, the average number of homes constructed every year was 1.53 million. But after the 2008 financial crisis, many construction companies went out of business and many others were hesitant to reinvest back into the industry. In the time since 2008, the average number of homes constructed per year has decreased 39%, with only 936,000 homes being built each year.
The amount of people renting has gone up in the past few decades as well. In 1999, just 22.5% of Americans were renters according to Moody’s Analytics. Today, Pew Research finds that about 36% of Americans are now renters. So this increase in rent is now impacting more people than ever before.