|More Americans Spending Majority of Income on Rent, Except in Washington|
The Washington Post The number of Americans spending more than half their income on rent has risen steadily across the country since 2008 — except in the D.C. region, according to a recent report.
Nationally, the share of working Americans who spend more than half their income on housing costs has grown every year since 2008, reaching 23.7 percent of all working households in 2011, according to the Center for Housing Policy, a research group. It was 21.8 percent in 2008.
In the Washington region, the percentage shrank: 20.8 percent of working households spend more than half of income on housing, down from 22.5 percent in 2008. The report defines working households as those that average at least 20 hours of work a week and in which total income is no more than 120 percent of the region’s median income.
Conventional wisdom suggests renters shouldn’t be spending more than a third of monthly income on housing costs, analysts said.
The findings reflect Washington’s unique position, analysts said. The region escaped the worst of the recession, and its housing market has weathered the downturn with less damage than some of the hardest-hit areas. The housing crisis drove up rental demand and prices in many cities as troubled borrowers were forced from their homes. But the effect was more muted in the D.C. area, analysts said.
“During the recession, there were a lot of job losses nationwide, but not so much in the Washington area,” said William Rich, senior vice president of the Alexandria-based research firm Delta Associates. “At the same time, rental rates increased at a slower pace.”
A construction boom in the region is expected to help keep rental prices from increasing quickly, analysts said. Developers broke ground on nearly 15,000 apartment units last year, many in the luxury-rental sector.
Across most of the country, many renters are facing a double whammy of falling income and rising rents, said Maya Brennan, senior research associate at the Center for Housing Policy and co-author of the report. Between 2008 and 2011, median rents rose nearly 6 percent, while income fell by more than 3 percent.
The average rent in the D.C. area rose during that period, too, by about 11 percent. But while income fell in most of the country, it grew by 4.2 percent locally. Washington rents are high in comparison with many cities, but that is offset by above-average income, housing experts said.
Overall, eight out of 10 working households in the country struggle with housing costs, the report shows. Homeowners are slightly better off than renters; the percentage of owners who spend more than half their income on housing has stayed essentially the same, about 20.9 percent, from 2008 to 2011.
The problem of expensive housing affects all income classes but hits lower-income workers the most, according to the report. Among working households earning less than 30 percent of their region’s median income, more than 80 percent spent a majority of their paychecks on housing in 2011. For those who earn 31 to 50 percent of median income, the share was more than 40 percent.
High rent squeezes a renter’s ability to save, and some businesses in high-rent areas struggle to find workers they can afford, analysts said. Also, low mortgage rates have made homeownership attractive, but renters may not be able to afford a down payment.
“If most of your income goes to rent, you can’t save for a down payment,” said Jed Kolko, chief economist at Trulia, a real estate research firm.
Rents will eventually fall as the supply of rental housing increases, analysts said. In states such as Florida and California, private investors have been buying residential properties to convert them into rentals. New construction also has started to tick upward.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on May 13, 2013