Think the poor are the only people failing to pay their rent? Think again. A new study from Harvard finds that even middle-class Americans are having a hard time keeping up with rent payments.
According to the study, even renters with annual incomes of $45,000 face unaffordable rents in many cities.
“It’s moving up the income ladder,” said Chris Herbert, Managing Director of the Joint Center For Housing Studies at Harvard.
They estimate that nearly half of all families earning between $30,000 and just under $45,000 a year are having a hard time keeping up as 30% of their earnings go to pay rent.
Four out of five renters who earn less than $15,000 spent more than 30% of their income on rent. Nearly three-quarters spent half their income on rent.
As rent prices continue to rise, rent stress placed on the middle class are likely to have broad economic consequences as they cut back in other areas of their lives to ensure their rent is paid on time. Those same individuals are likely to cut back on retirement savings.
“It still means they have to cut back on a variety of things… If you’re spending 30% or more on your income on housing you have less to spend,” Herbert said. “I think there’s a spillover on other parts of the economy.”
Rent demand has continued to increase in cities such as New York City, which has led to higher rental prices, which are met with stagnant wages that haven’t kept up with rent inflation.
The median rent last year was $934 with only 10% of new rentals hitting a price point of $850 or less.
More than a third of rentals are priced at $1,650 or higher.
Herbert believes there will eventually be relief for some middle class renters after developers saturate the market with high price rentals for the upper class segment.