Low-Income Renters Cannot Afford Even The Cheapest Apartments

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The Editors's picture
low income renters cannot afford even the cheapest apartments

Low-income renters, those who earn the least, cannot afford even the cheapest market-rate rentals in the nation's largest metro areas, according to an analysis of multifamily rents and Census income data, according to a release.

The rent affordability crisis is especially tough for the lowest-earning Americans, according to the release from Zillow.

 Property managers know a common rule of thumb is that people shouldn't spend more than 30 percent of their income on housing, allowing them to save for emergencies and afford other expenses.

 In the largest 25 metros in the United States, the typical rents require a much larger share than that recommended amount for renters whose incomes fall into the bottom third of the income distribution, even when they are looking at the cheapest apartments on the market.

  • Rent growth at the lower end of the market outpaced income growth in nearly all major metros.
  • Most renters don't have enough savings to cover three months of living expenses in an emergency.
  • Renters whose incomes are the bottom third of all incomes earn less than $30,000 annually in 24 of the largest 25 U.S. metros

Spending such a significant portion of income on rent means making other financial sacrifices. Putting aside money for an emergency is a luxury many renters don't have – 68.8 percent don't have enough savings to cover three months of living expenses. Instead, the main financial concern for most renters is affording basic bills, like food, utilities, and gasoline, in addition to the rent.

Income grew by $485 while rent grew by $1,145 in San Francisco

From 2011 to 2016, rents increased much more than incomes did, and this is especially evident at the lower end of the market.

 Even in markets where lower incomes saw significant gains, rents in those markets saw much bigger jumps.

For example, the monthly earnings among the lowest third of incomes in San Francisco increased by about $485 between June 2011 and June 2016, but over that same time period, apartment rents grew $1,145.

Low-income renters face doubling up, moving or substandard housing

"Any renter can tell you how difficult it is to save up extra cash while spending an increasing portion of their income on rent, but it's much worse for those who make the least,"  Zillow Chief Economist Dr. Svenja Gudell said in the release. "Income inequality is growing in the United States, and this shows how high housing costs contribute to preventing people from moving up the ladder. There are several factors at play here, including wage growth dampened by the recession and increased demand on the rental market. Without a long-term solution to affordable housing, the gap between the haves and have-nots will continue to widen."

The median rent for apartments in the least expensive third of the market required more than 100 percent of the typical income for the lowest-earning people who live in Los Angeles. People who are unable to get a housing subsidy likely must double up or move further from their jobs to find more affordable rents, according to the Zillow research.

Among renters paying more than 36 percent of their incomes on rent, 60 percent report they have no savings at all, according to earlier research. In many ways, they are at the mercy of their next parking ticket or medical bill. They’re also forced to make difficult decisions:

  • They can stay put, often avoiding the worst rent increases by sticking with their landlords long-term.
  • They can live with their parents or double up (although this research already is based on household incomes, people with roommates may not have included the incomes of everyone pitching in).
  • They also can settle for substandard housing, which sometimes – but not always – means a break on the rent. It’s a choice that can be a slippery slope into an eviction cycle that sometimes ends in homelessness.
  • If they’re lucky, they have a housing voucher that limits the amount they spend on rent to 30 percent of their incomes.
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