Rent. When Is It Too High?
One in three Americans is now shelling out the standard one third of income for rent, but for many, for instance those in the Bronx borough of New York City, it is more typical to see 66 percent of the household’s income disappear into the hands of landlords. That’s the worst it gets, according to RealtyTrac. To add to the woes of the Bronx dwellers, the overall median income is under $35,000, with the average rent at $1,800 per month.
The dilemma is spreading to other some cities, the realty oversight company says, with growing numbers of pockets of low-income renters. In Philadelphia, Brooklyn, Baltimore and Miami many must part with 50 percent of their income monthly to keep a roof over their heads.
The fallout from the recent recession is contributing to the problem. The crisis in foreclosures turned millions of former homeowners into renters. And the continuing uncertain economy has discouraged many renters from becoming homeowners, according to Harvard’s Joint Center for Housing Studies. Increased demand has seen rents climb by 21 percent since the housing market peaked in 2006.
At the same time, real income – after inflation – has dipped by 14 percent, creating a double whammy for the renters. The Harvard center found that about one in four renters overall is paying more than 50 percent for housing. The result is inevitably that there is less to spend on food, healthcare and retirement.
The rent reality becomes a factor when a person considers a job change that has, initially, less pay but offers more opportunity in the future. The immediate demands may trump the potential. Additional education also may be sacrificed even if, in the long run, it would improve an individual’s future prospects. Saving for a new home becomes difficult, if not impossible. Bottom line: Reasonable rents contribute to the overall financial health of the country.