Tuesday, CNBC’s Diana Olick reported that Americans can expect unaffordable rents to worsen.
According to CNBC’s report, by 2025 13 million renters will spend 50% of their income on rent. This comes at a time when we are seeing more renters than in U.S. history. Homeownership rates recently hit a 48 year low at 63.4 percent in the second quarter of this year.
Since 2010, the rental rates across the United States have increased 14 percent. In a recent study, Zillow found the cost of renting a home in the U.S. has risen to its least affordable levels ever. Renters in the U.S. can now expect to pay around 30.2 percent of their monthly income for rent, which is the highest percentage recorded in history.
One of the largest contributors of this problem, is the U.S. and private sector’s inability to provide affordable housing. According to one study, back in 2013 the median rents of newly constructed units was $1,290, which is about half the median renter’s monthly household income. Luxury apartment rentals are popping up all over major U.S. cities, while the supply of affordable multi-family homes remains meek.
The question is, how long will renters be willing pay rental rates that are increasing 4 percentage points faster than inflation and more than double U.S. home prices?