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Rent prices are coming down in some areas, but not at the pace needed to relieve tenants struggling to pay rent.
Half of renters in the U.S. spent more than 30% of their income in 2022 on rent and utilities, according to the new America’s Rental Housing report by the Joint Center for Housing Studies of Harvard University.
The report considers those who spend 30% or more of their income on housing “rent burdened” or “cost burdened,” which means those high costs may make it difficult for them to meet other essential expenses.
The share of cost-burdened renters increased by 3.2 percentage points from 2019 to 2022.
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“Places in the market that need the most relief are at the very low end, and it’s hard to reach those people through market rate supply alone,” said Whitney Airgood-Obrycki, lead author and senior research associate focused on affordable housing at the Joint Center for Housing Studies of Harvard University.
While cost burden has increased across income levels, the consequences are much higher for low-income households, said Airgood-Obrycki.
‘We have a very unaffordable country right now’
The average residual income, or the amount of money available after paying for rent and utilities to cover other needs, has significantly dropped for lower earners, the study found.
“It’s a really important part of the conversation because … it makes it more humanizing how big this problem is,” Airgood-Obrycki said.
Renter households with annual incomes below $30,000 had a record-low median residual income of $310 a month in 2022, the Harvard study found. For perspective, a single-person household in even the most affordable counties need about $2,000 a month for non-housing needs, according to the Economic Policy Institute.
“The underlying problem is we have a very unaffordable country right now,” she said. “If you go through any sort of life crisis, you’re on the brink of homelessness.”
Most young adults have either stayed at home with their parents or are moving back in because of the cost of living.
Share of young adults living at home goes back to 1940s
Historically, what kept young adults living at home was the lack of a job; today, it’s the lack of affordable housing, according to Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania.
The percentage of Gen Z adults living at home “takes us all the way back to 1940, the end of The Great Depression,” said Wachter.
The share of young adults between the ages of 18 and 29 who live at home with parents is almost at 50%, according to a study Wachter co-authored.
That is a result of young adults competing with potential homebuyers, who themselves are being priced out of the single-family housing market.
“They’re competing in a way that they haven’t before,” she said. “The home mortgage market is indirectly causing a huge spillover demand into the rental market, making the rental market not affordable.”