There is no price inflation if you live on a bench in a park. There is no other way to put it: rents are spiking (SEE: Price Inflation: U.S. rents not slowing down, spike 3.5% in May), and there is no slowing down.
New research from Harvard University’s Joint Center for Housing Studies (JCHS) and Enterprise Community Partners finds that rent is going to become even more unaffordable over the next decade. If you thought the rent was already too damn high then expect to be stunned.
According to the report, the number of households that spend more than half of their income on rent is set to soar by 11 percent from roughly 11.8 million this year to 13.1 million by 2025. The biggest increases will be noticed by older adults (39 percent), single-person households (12 percent) and Hispanics (27 percent).
Study authors noted that one-quarter of renters, or 11.2 million households, were seriously burdened by the cost of rent in 2013, which was up three million from the year 2000.
Interestingly enough, if you take into account renters who face “moderate burdens” then the figure represents half of all renters in the United States.
“Even in the unlikely event that income growth greatly outpaces rent gains, the number of severely cost-burdened renters will remain near current record levels,” said Christopher Herbert, managing director of Harvard’s Joint Center for Housing Studies, in a statement.
Why is rent going up so much? Well, a part of the reason is that there are a greater number of people chasing rentals. With a tightened rental market and lower vacancy market, the U.S. is experiencing the greatest number of renters in its history. Homeownership rates are at their lowest since 1967.
“The need for affordable housing is already overwhelming the capacity of federal, state and local governments to supply assistance,” the study said. Today, there are more than 11 million low-income households vying for 7.3 million affordable housing units. Indeed, it’s unsustainable.
Moreover, the private sector is unable to fill in the demand for low-cost homes due to a variety of factors, like price controls, government regulations, price inflation, energy costs and so on. Developers are not building enough apartment complexes. And when they do then the median rent for a newly built housing unit is $1,290.
This comes as a Zillow report (SEE: Price Inflation Alert: Renters spending record-high 30% of income on rent) found that renters are spending a third of their income on rent.
Once again, there is no price inflation in the U.S. if you live in a tent in the middle of the forest.
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