Find out why renters are getting richer and richer

Posted by Written with love by the Livable Content Team on Mar 1, 2020 3:00:00 PM

 It used the be that the “American Dream” was synonymous with home ownership. But Millennials don’t seem to be putting the same emphasis on buying property as previous generations. In fact, the homeownership rate for those currently between the ages of 25 and 34 is 8 percentage points lower than Gen Xers and baby boomers when they were in the same age group, according to a report from the Urban Institute

 There are various reasons for this, from increased student debt obligations to the trend towards delaying marriage and children to simply enjoying the convenience and lack of commitment of renting. But the end result is that more and more people that we would typically think of as making the move to first-time homeownership have decided to stay put in the rental market. As you’ll read below, this trend is having ripple effects across the industry, with wealthier and wealthier renters exacerbating affordability issues in many areas. 

Even Middle-Income Renters Are Feeling the Pinch

 Since 2010, high-income households have become the primary source of rental demand, according to a new report from the Joint Center for Housing Studies of Harvard University. These high-income households are also more likely to be college-educated, married, white and headed by young adults, according to the results. “Young, college-educated households with high incomes are really driving current rental demand,” said Whitney Airgood-Obrycki, a research associate at the center and lead author of the new report. 

 Given this trend, perhaps it’s no surprise that new apartment developments have largely targeted the upper end of the market.   The nationwide median monthly asking rent for unfurnished apartments completed in 2018 was just over $1,600, according to the study, well above the $900 median rent for all units in 2018.

 At the same time, the number of available low and moderate-cost units has dwindled. Rents have risen nationally for the past 21 consecutive quarters and rental vacancies are at their lowest point since 1986. More middle-income renters (those who make between $30,000 and $75,000) now pay more than 30 percent of their salaries on housing. The picture is even more dire for those who make below $30,000—the majority put more than half their monthly incomes toward housing costs. The median renter earning less than $15,000 in 2018 had only $410 left each month to cover all other necessities after paying rent, according to the report.

 “Despite the strong economy, the number and share of renters burdened by housing costs rose last year after a couple of years of modest improvement,” said Chris Herbert, managing director of the center. “And while the poorest households are most likely to face this challenge, renters earning decent incomes have driven this recent deterioration in affordability.”

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