The average apartment rent hit $1,099 in the second quarter of the year, new data from a real estate research firm shows, as the gap between the typical American’s cost of living and the wages she earns from working continued to widen.
Average rents rose by 0.8 percent from March to June, and are now up 3.4 percent over the past year, according to Reis Inc. data. In total, the average monthly rent price is now up almost 15 percent since 1990, after adjusting for inflation.
By comparison, the median household income has grown exactly zero percent since 1990, the Wall Street Journal notes:
Even those gloomy national figures paint a rosier picture than the reality that tens of millions of American families face. If you do the math using the top-line numbers, rents still seem affordable: the average calculates out to about 26 percent of a person’s yearly income going toward rent. But that’s not how it actually operates on the ground.
A full 50 percent of American renters spend more than 30 percent of their income on housing, which is what researchers define as the cutoff for affordable housing. More than a quarter face extremely unaffordable housing costs, meaning they spend more than half their income on housing. A New York Times and Zillow analysis found that median rent was above the 30 percent affordability threshold in 90 different U.S. cities, even before this most recent quarterly rise in rent prices.
Rents are outpacing earnings in part because the demand for rental housing has exploded since the financial crisis. Foreclosed homeowners and others unable to afford or obtain a mortgage are turning instead to the rental market. Cuts to government housing aid spending and the broader stagnation of wages for working people increase the reliance on rental even more.
Rep. Mark Takano (D-CA), who has been an outspoken advocate for addressing the crisis in rental costs, called Wednesday’s news “troubling,” and reiterated a call for government scrutiny of the rental housing market. Takano is particularly concerned about the influence that large investment companies are suddenly having over rental housing.
“Millions of Americans were forced into the rental market when the housing crisis began in 2007, and now they are in danger of being forced out of their homes once again,” Takano said in an email. “I’ve asked the House Financial Services Committee and several government agencies to look into the possibility that bulk purchases made by institutional investors are contributing to the increase in rental costs.”
Hedge funds and other large financial companies have spent the past couple years buying up hundreds of thousands of vacant homes in order to make investment profits off of the rental boom. One hedge fund, the Blackstone Group, has become the largest landlord in America. It will make money if tenants pay their rent, but if fears about an unsustainable rental housing bubble prove well-founded and the leases that Blackstone and other distant Wall Street landlords are relying upon go into arrears, the financial losses could be significant. Wall Street’s new role as landlord also means that the same industry that caused the housing crisis is finding a new way to profit from that calamity. From the way industry insiders talk about the new financial products that are tied to rental housing, Wall Street is very optimistic about making a great deal of money off of the rental boom.
The changing shape of the traditional renter-landlord relationship could also mean that “Wall Street-based absentee slumlords” replace local, relatively responsive property owners. But even if the companies that Blackstone and the other money mills hire to manage their rental properties do their jobs diligently — despite having incentives to cut corners in order to maximize their own profits — the persistent disconnect between how much working people make and how much they have to spend just to sleep indoors appears set to continue.