A new study published in the Journal of Regional Science has underlined the growing issue of rising rents in the U.S. amid a shift in the housing market away from homeownership, CityLab reported.
Citing data from the U.S. Census and the Consumer Expenditure Survey, the study found that from 1970 to 2010, rents increased 28.7% while incomes grew 13.8%. And from 2001 to 2014, the number of renters spending more than half of their income on rent rose by more than half to 11.4 million.
In large metros, the rent–income growth gap was especially pronounced. In New York, for example, rents shot up 50.2% while renter incomes dropped 14.9% between 1970 and 2010. On the other hand, Pittsburgh rents grew only 4.3% but renter incomes there plummeted 31.5%.
Rent increases disproportionate to income growth mean renters have less money left over to put toward a down payment, CityLab noted in its analysis of the JRS survey. The U.S. homeownership rate hovers near a 51-year low as home prices remain elevated amid tight inventory conditions and younger first-time buyers, in particular, struggle to save enough money for a down payment, forced to rent or live with family instead.
A recent analysis of user feedback and U.S. Census Bureau data by real estate listing website Zillow found that 66% of millennial homebuyers said they had thought about renting rather than buying a home compared with 54% of Gen-Xers and 32% of baby boomers.
New measures are slowly coming forward to help tackle the problem. Property data provider CoreLogic recently announced that it is joining forces with RentTrack to offer an online rent payment system that allows residents to amass credit by making rent or homeowners association payments online. It comes on the heels of SoFi Lending Corp. and the government-sponsored Fannie Mae’s launch of a loan option that allows homeowners to refinance their mortgage and use that equity to pay down their student debt.
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