The rent really is too damn high in 90 separate American cities, according to an analysis by real estate analysts at Zillow on behalf of the New York Times.
The analysts measured median rent prices as a share of median pre-tax income and found that rent gobbles up more than 30 percent of earnings. That 30 percent threshold is what is considered affordable, codified in Department of Housing and Urban Development (HUD) guidelines for federal housing aid programs. When HUD measures a renter’s cost burden, it includes utilities as well — something Zillow’s analysis did not include.
The city-specific figures reflect a broader trend. Just 38 percent of renters faced unaffordable housing costs in 2000, but that figure has risen to a full 50 percent of the renting population nationwide. The combination of stagnant wages, a prolonged unemployment crisis, mass foreclosures, and a shrinking pool of affordable housing options has pinched the renter market from every direction in recent years, pushing prices up across the board. The number of people looking to rent jumped by 6.2 million from 2007 to 2013, the Times reports, while just 208,000 more people on net became homeowners in that period.
As rents have climbed relative to tenant budgets, the federal government has reduced housing aid funds instead of boosting them. The total pool of money for affordable housing has “been cut in half over the last decade” and the “percentage of eligible families who receive rental subsidies has shrunk, to 23.8 percent from 27.4 percent,” the Times reports.
As with many other economic problems for working people, the solution to the renting crisis could come from shoring up tenants’ incomes. Workers are coming off a “lost decade” of wage stagnation and decline despite having raising their productivity levels by about 25 percent over the same period. Low minimum wages mean that even people who work full time can’t necessarily make ends meet, and rampant wage theft in those same low-wage industries exacerbates that injustice.
Amid the government’s pullback from efforts to make housing affordable and the spike in demand for rental units, Wall Street has found an opportunity to profit. Giant financial companies are buying up foreclosed houses on the cheap in order to rent them out. A hedge fund called Blackstone is now the country’s largest landlord. Not content with the thinner profit margins of the landlord business, these companies are packaging up rent payments into securities that mirror the structure of the housing finance deals that blew up the economy almost six years ago. In at least one case, the financial industry’s move into the landlord business is threatening to undermine the public services of an entire town.
The fledgling market for rental-backed securities is winning approval from ratings agencies and interest from investors, but it bodes ill for the people who live in these houses. Distant corporate owners are less responsive to tenant problems than a traditional landlord or property management company would be, and tenants’ lives can be sharply disrupted should one of the securities deals tied to their leases go bad.