More Americans are struggling to make rent. The volume of renters dedicating at least half of their income toward housing hit a record high of 11 million individuals in 2014, in accordance with the annual State of the Nation’s Housing Report from the Joint Center for Housing Studies of Harvard University. A total of 21.3 million are spending 30% or more of their paycheck to cover the rent — additionally a record high. Personal finance experts generally suggest budgeting around 30% of monthly income to pay for housing costs. But that’s getting harder to do with rent prices rising faster than wages. Household budgets are taking a hit.
Losing such a large percentage of a paycheck to cover housing means curtailing in other areas. “When you have to dedicate such a high proportion of your income to rent every month, it forces you to make difficult decisions,” said Dan McCue, a senior research associate at the Joint Center. Not only does this mean less spending on essentials like food, clothing and medical care, it also causes it to be tougher to accomplish long-term financial security by saving for an emergency fund, a down payment or retirement.
11 million People today expend 50 percent of their pay on rent payments
In the 10 cities with the highest housing costs, renters with middle-class incomes are experiencing a particularly hard time making ends meet. Nearly 75% of renters earning $30,000-$44,999 and 50% of those making $45,000-$75,000 residing in these hot markets are considered “cost-burdened” — meaning they spend at least 30% of their income on rent.
It’s not just young people who are renting
“The shift toward renting has been widespread among age groups, incomes and different types of households,” said McCue.
Last year saw the largest surge in new renters of all time, based on the report, bringing the number of people living in rental units to around 110 million people — or about 36% of households.
Middle-aged renters made up the majority of the new demand, with 40% of renters aged 30-49.
And renters are sitting on both ends of the pay scale: almost half of the latest renters in 2015 earned less than $25,000, while top-income households have been the fastest-growing segment of new renters for the past 3 years.