Affordability remains a major issue throughout the real estate sector, but a recent report from the Joint Center for Housing Studies of Harvard University emphasizes the issue. According to the report, approximately one half of all renters across the United States are considered “cost-burdened,” meaning they are spending more on rent than they can afford. It is a sign of the need to bring housing costs under control, as more and more people struggle simply to afford basic expenses.
Half of U.S. Renters Are Cost-Burdened
According to the report, around half of U.S. renters are classified as cost-burdened. This is defined as someone who spends 30% or more of their income on rent and utilities, which is more than is considered affordable. The fact that so many people are spending so much money simply on housing costs often means they have little money for other essential expenses, such as food or medical bills.
Cost-Burdened Renters Have Little or No Savings
The net result of this phenomenon is that these renters often have little to no money saved up for potential emergency expenses. In many cases, people have either remained with their parents or moved back in with parents after finding that housing became too expensive for them to handle on their own. And unfortunately, this is not a problem that can simply be fixed by adding new housing to the market, as prices remain elevated thanks to prospective home buyers searching for their own housing.
Issues Aggravated by Inflation, High Interest Rates
Making matters worse are the two intertwined issues of high inflation and high interest rates. The past few years have seen high levels of inflation that have sent the cost of living skyrocketing past the point of affordability, eating further into their already limited income. Meanwhile, high interest rates have made it harder to get financing overall, not just for housing but for any other loans someone may want to take out, such as student loans or business loans, making it harder to escape these affordability problems.
The Potential Impact on the Housing Market
The result of this is that many renters, particularly younger renters, are being priced out of the market. People purchasing properties hoping to rent them out may find out that there are simply a limited number of people who can afford to rent at current market rates. It is likely this issue will continue for the foreseeable future, at least until prices begin to come down.
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