Rising Rental Costs Strike More Households
July 31, 2015
Rental costs are climbing faster than wages across many parts of the country – a problem that has only worsened in the past year, according to a growing number of housing surveys.
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"Rents have skyrocketed so much and incomes haven't kept pace, so we have an affordability crisis in some of our major metropolitan areas for the middle housing market," Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, told The Wall Street Journal.
Economists are blaming the crisis on supply and demand issues, with a limited supply of rentals combined with more renters that has prompted prices to rise across the country.
From 2003 to 2013, the share of renters aged 25 to 34 who are considered cost-burdened rose from 40 percent to 46 percent, according to a report by Harvard University's Joint Center for Housing Studies. Economists usually consider a household "cost-burdened" if they're paying at least 30 percent of income on rent.
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Rental rates increased 5.2 percent from a year earlier, reaching a 15-year high, according to MPF Research. The West saw some of the highest increases in rental costs, with Oakland, Calif., posting the largest increase at 11.8 percent in the past year.
Mid-tier cities are also seeing prices climb. For example, Greg Willett, vice president for research and analysis at MPF, singles out Nashville as one city "getting meaningfully more expensive." Rents there rose 5.1 percent in the second quarter compared to a year earlier and are outpacing income growth, which was at a 2.4 percent growth between 2013 and 2014.
"We have a problem," says Fabian Bedne, a Nashville district council member and a sponsor of a city bill that proposes a new zoning plan to increase the supply of affordable housing. "There is not enough of a pool of housing available, the rents are going up, and it’s making it harder for people."
Builders are ramping up production of apartment units across the country. However, housing analysts say that many of the new units are luxury apartments and low-income Americans are finding a limited supply.
Source: "Rising Rents Outpace Wages in Wide Swaths of the U.S.," The Wall Street Journal (July 28, 2015)
Updated: September 20, 2019