Rents are rising fast. Wages are not.

What is happening?

Americans are more likely to rent their homes than at any time in the past 50 years. A decline in homeownership, tighter mortgage lending standards and a large generation of young adults buying homes later in life means more people are renting their homes.

As a result, rents are rising.

The number of renter households – households spending 30% or more of their income on rental costs – jumped from 14.8 million in 2001 to a record-breaking 21.3 million in 2014. That’s nearly half of households who rent. Of those, 11.4 million – more than one in four — spend more than half of their income each month on their rent. Housing experts call those renters “severely cost-burdened.”

Source: Enterprise and the Joint Center for Housing Studies, Projecting Trends in Severely Cost Burdened Renters

This is a widespread problem. In fact, at least 37 percent of renter households – in every state in the country –spend more than 30 percent of their income on the cost of their homes. And in many states, well over 25 percent of renters are paying more than half their income just to keep a roof over their heads.

SourceEnterprise and the Joint Center for Housing StudiesProjecting Trends in Severely Cost Burdened Renters

Not only are soaring rental prices outpacing inflation, they’re also outpacing Americans’ incomes. As housing costs go up, wage growth has been slow, especially for low-income households. Over the past 15 years, low-wage workers have barely gotten any raise, after inflation is taken into account. Higher-income workers, meanwhile, have received regular pay increases.

Source: EPI Analysis of Current Population Survey Outgoing Rotation Group Microdata

Why is this happening?

The recession was a major factor.
 At the peak of the foreclosure crisis, more than 12 million homeowners were underwater on their mortgages, owing more on their loans than their properties were worth. About six million homes have been lost to foreclosure since 2008, forcing owners into rentals – increasing rental demand and pushing up costs.

Population growth means more renters. 
Millennials are coming of age, and today 45 million millennials are in their twenties – the prime age for renting. Generation Xers are renting longer, and Baby Boomers are renting more than previous generations.

Seniors are moving – and downsizing. 
Over the past decade, 4.3 million more Americans in their 50s and 60s have decided to rent. And as Baby Boomers reach their 70s, they’ll be looking for more accessible housing, continuing to turn to rentals.

Source: JCHS tabulations of US Census Bureau, Current Population Surveys

In fact, the increase in households nationwide since 2005 has been driven by renters.

Source: Zillow analysis of US Census Bureau, March Current Population Survey

Young adults are delaying major life decisions, including putting off buying a home.

Source: Zillow analysis of U.S. Census Bureau, Current Population Survey, made available by the University of Minnesota, IPUMS-USA.

Developers are building new rental homes, but mainly for the luxury market.

Source: JCHS tabulations of US Department of Housing and Urban Development, 2013 American Housing Survey.

We can prevent this from happening. Whether it is incentives or requirements for developers to include affordable apartments in new buildings or changing zoning laws to allow for more rental construction, good policies can make a real difference.

We believe that by expanding the supply of affordable homes, by strengthening public support for renter assistance programs, and by ensuring hard-working American families achieve financial stability, we can reverse this trend.

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