The low-income apartment dwellers can't even afford the least expensive units.
If you’re renting now to save up for buying a house later, you might not be able to afford rent anymore.
Zillow says the Americans who earn the least are struggling to pay for even the cheapest apartments on the market right now because they don’t earn enough.
As a standard rule, we shouldn’t be spending more than 30 percent of our income on housing. But in some places, workers would be spending more than their entire incomes on renting. In New York, the median income for the lower third of earners is $20,740, but to pay for rent there, workers would need to spend 111.8 percent of their income. It’s not much different in Los Angeles, where residents are paying 107.8 percent of their income.
Because of the extreme cost of rent in major metro areas, residents are left with nothing to save.
“Any renter can tell you how difficult it is to save up extra cash while spending an increasing portion of their income on rent, but it’s much worse for those who make the least,” says Zillow chief economist Svenja Gudell. “Income inequality is growing in the United States, and this shows how high housing costs contribute to preventing people from moving up the ladder.”
Gudell says stagnant wage growth and huge spikes in rent have prevented and will continue to prevent renters from saving.
“Without a long-term solution to affordable housing, the gap between the haves and have-nots will continue to widen,” he says.
There is no major metropolitan area where the poorest renters will only spend 30 percent of their income. The place that comes the closest is Atlanta, where renters are paying 47 percent of a median income of $22,814 a year. Minneapolis-St. Paul, Minn. is at almost 48 percent, where pay is averaging $27,066 annually.
Renters can’t catch a break
Whether it’s staying where they are or moving away, renters are having a hard time making ends meet wherever they are. This could explain why younger people are still living at home with their parents. If there isn’t a major metro area where young people can affordably live, why bother leaving home? In fact, parents want their kids to stay home because at least there — even paying them rent! — they can save money.
This is good for either their prospects of renting or homebuying, even as young people aren’t entirely interested in buying homes right now. Due to down payment problems and mortgage rates on the rise, renters are happy staying put — even if it’s with their parents.
For renters who might not have the luxury of living at home, there are some places that you can live without going broke. Cities like Boston, Chicago, and Philadelphia are some of the best places to live without a car, which can save you a lot of money that will probably go to rent anyhow.
If you’re just looking to save money, go to any place with a low cost of living, like Virginia Beach, San Antonio, and Tucson. Stay out of California, Seattle, and Miami. If you’re really trying to stash away extra cash, move to Mississippi.
Meet the Author
Article last modified on October 19, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Renters Are Being Priced Out - AMP.