Experts generally recommend keeping your housing costs
around 30% of your monthly income. But the number of "cost-burdened"
tenants -- those who spend more than 30% of their income on rent -- rose to
21.3 million people last year, according to Harvard's Joint Center for Housing
Studies. Of those, more than 26% are "severely cost burdened" and
spend more than half of their income to cover rent.
Here's the problem: rents are increasing much faster than wages.
Inflation-adjusted rents increased 7% from 2001-2014 while household incomes
dropped 9%, the report showed. At the same time, rising demand for rental units
has pushed the national vacancy rate to a 30-year low, driving prices even
higher. The median rent for a new apartment climbed to $1,372 last year, a 26%
increase from 2012.
While low-income households are the most likely to have a
hard time making ends meet, middle-income households are increasingly struggling to make rent.
The number of burdened households with an income of $45,000-$74,999 jumped to
21% in 2014 from 12% in 2001.
Builders have ramped up construction recently, but supply
hasn't kept up with demand and new units tend to focus on the higher end of the
market. Land costs and regulations make building expensive, and developers need
to make a return on their investment. Higher rents put a strain on household
budgets. Families that paid more than half of their income on rent spent
38% less on food last year and 55% less on health care, according to the
report.
The 2008 housing crash has led to record rental demand with
37% of households renting in 2014 -- the highest level in more than 45 years.
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