Report: Poor renters move to cheapest places.
Nationally, the number of people spending 30 percent or more of their income on rent, reached the lowest level since 2008. However, growth in renter incomes, which outpaced increases in rent prices, is largely the result of an influx of high-income earners in the rental market, rather than an increase in the wages of existing renters, according to the survey.
Florida and California have the largest shares of cost-burdened renters, while the South and Midwest remain more affordable, according to the survey.
Cost burden increased in metros where increases in rental prices outpaced income growth, including in Los Angeles, Washington, D.C., and New York. According to ApartmentList.com, from 2005 to 2016 renter income increased 7.3 percent, compared to just 1.4 percent for homeowners.
During the same time period, the share of renter households earning over 120 percent of the area median income (AMI) increased by 4.1 percentage points, while the share earning under 80 percent of the AMI fell by a similar amount.
This trend is driven both by high-income renters delaying homeownership and by low-income renters being priced out of the rental market.
Poor renters pushed out of the rental market may move to cheaper areas, double up with family members or other low-income renters or end up homeless.
Additionally, there is evidence that rents have been increasing faster than wages for low-wage and less-educated workers.
A recent Apartment List analysis showed that from 2005 to 2015, "post-rent wages," or wages left after deducting median rent costs, decreased for service workers (-7 percent) and blue-collar workers (-5 percent), while only knowledge workers saw an increase (six percent).
Stagnant wages for working-class Americans indicate that these gains in renter wages are primarily due to a change in the composition of renter households, with more high-income households renting.
Of the largest 100 metros in the U.S., Miami has the highest share of cost-burdened renters at 62.8 percent, while Ogden, Utah, has the lowest share, at 37.9 percent. Five of the top 10 most cost burdened large metros are located in California. Despite high rents in the San Jose and San Francisco metros, these cities have lower shares of cost burdened renters, 48.3 percent and 46.8 percent respectively, due to the large share of high-income renters.
Many smaller Southern metros, located in Texas, Louisiana, Mississippi and Alabama, have high cost burden rates, as well.
Metros located in the Midwest, Rust Belt and South are more affordable for renters. Raleigh, Louisville, Charlotte and Knoxville all have cost burden rates of under 45 percent.
Pennsylvania metros also fair well, with Harrisburg, Pittsburgh and Scranton in the top 10 most affordable large metros.
Utah and Idaho metros, including Ogden, Utah (No. 1), Boise, Idaho (No. 4) and Provo, Utah (No. 6), have seen some of the biggest decreases in cost-burdened renters, driven by strong job and wage growth.
Midwest and Rust Belt metros that have been able to build up new industries outside of manufacturing, such as Pittsburgh (No. 3), Cleveland (No. 5), Grand Rapids (No. 8) and Minneapolis (No. 11), have seen increased affordability.
Nationwide, the growth in renter incomes has outpaced rent growth for the past few years, causing a decrease in the share of cost burdened renters.
The report concludes that rental affordability is improving, as 2016 marks the fifth consecutive year in which renter incomes increased faster than rents, reducing the share of cost burdened renters.
Despite this, affordability continues to be a challenge for millions of renters.
With cost-burdened rates of over 45 percent in most large metros, and over 10 million severely cost burdened renters nationwide, the lack of affordable housing remains a major challenge for renters.
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|Comment:||Report: Poor renters move to cheapest places.|
|Publication:||Real Estate Weekly|
|Date:||Nov 15, 2017|
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