New Housing Crisis Looms Across US As Gap Between Income And Rents Widen


A New Housing Crisis Ahead

Two new housing reports illustrate how burdensome rental rates, lower wages and less inventory of affordable housing are making more families vulnerable to homelessness.

Renters At Risk

By the end of 2014, 36 percent of Americans were renters. Increasingly, more of these families are paying so much in rent that they are only one paycheck away from homelessness. 11.5 million U.S. families (one in four) pay half of their monthly income on housing and utilities. 1.8 million of these households spend at least 70 percent of their paychecks in rent.

This is according to an analysis of census data by “Make Room,” a non profit that focuses on affordable housing. [Make Room (PDF)]

Housing Affordability Dropping

In the U.S., the accepted indicator of housing affordability is that no more than 30% of income should be used for housing expenditures. The more the percentage grows, the less affordable the home is, and the more unstable a family’s finances. It is very possible that these numbers will only increase in some areas, as rental rates are growing faster than home values in the majority of U.S. largest housing markets.

The annual report ,from the National Low Income Housing Coalition highlighted the housing insecurities of this country’s minimum wage workers.There is no state in the U.S. where a person earning minimum wage and working full time can afford a one-bedroom apartment at the fair market rent. In fact, A renter household needs 2.7 full-time jobs paying the minimum wage in order to afford a two-bedroom rental unit at fair market rate in some areas. [Out Of Reach 2015 (PDF)]


In New Jersey, fourth on the list of higher rental areas,1/3 of the people rent. A person must earn $25.17 an hour – or $52,347 a year – to afford the average fair-market rate of $1,309 for a two-bedroom rental. A renter earning the state’s minimum wage of $8.38 an hour would have to work three full-time jobs to afford the rent for a two-bedroom place. The average hourly wage of renters in New Jersey is less than $17, meaning they would have to work 59 hours a week to afford a two-bedroom rental at a fair-market rate.

There is is little motivation for a landlord to charge more affordable rates when rentals are in such high demand in most areas. Home ownership rates have reached historic lows. As fewer people buy homes, rental markets rapidly tighten. By the end of 2014, the homeownership rate dropped to its lowest in twenty years, while the rental vacancy rate fell to 7% as more households sought rental units.

Usually there is a natural flow to the housing market as renters become homeowners, leaving their spaces for others. This flow is in jeopardy because overburdened renters are unlikely to become homeowners. Their rental burden makes it difficult to save money for a downpayment or anything else. If the current trend continues, we can expect increased competition for housing and rental rates to continue to increase. Those who cannot compete will exit the market completely, and enter the population of the homeless.

Tarron Houston is a Financial analyst and consultant with an extensive business background. She holds a B.S. in real estate and finance, a real estate brokers license and Masters Degree in Business.She has been a business journalist for over 15 years and enjoys writing on various topics with the central themes of business, real estate, entrepreneurship and taxes.