The number of renters dedicating at least half of their income toward housing hit a record high of 11 million people in 2014, according to the annual State of the Nation’s Housing Report from the Joint Center for Housing Studies of Harvard University.
Source: Money Magazine
While renters are paying more, affordability is improving for those who own their homes. The number of cost-burdened homeowners declined in 2014 for the fourth consecutive year, according to the report, thanks to low mortgage rates.
Over 11 million spend nearly 50% of their income on rent and 21.3 million are spending 30% or more of their paycheck to cover the rent — also a record high.
Personal finance experts generally suggest budgeting around 30% of monthly income to cover housing costs. But according to the article, that’s getting harder to do with rent prices rising faster than wages.
Last year saw the biggest surge in new renters in history, according to the report, bringing the number of people living in rental units to around 110 million people — or about 36% of households.
Middle-aged renters made up a lot of the new demand, with 40% of renters aged 30-49.
And renters are sitting on both ends of the pay scale: almost half of new renters in 2015 earned less than $25,000, while top-income households have been the fastest-growing segment of new renters for the past three years.
What’s really fascinating about this phenomenon is that housing prices are relatively affordable and interest rates are extremely low, both based on historical norms.