Since the financial crisis of 2008, fewer people have purchased homes and more, either by necessity or choice, have rented their homes. With demand increasing faster than supplies of available property, rents have skyrocketed, especially in expensive housing markets.
In the San Francisco Bay Area, rents are up a staggering 14.8% year-over-year, according to the real estate site Zillow. Nationwide, rents are up just under 4%.
Make Room, a non-profit group focusing on rental affordability, estimates more than 11 million families, or 1 in 4 of the 42 million U.S. renter households, spend at least half their income on rent. It bases its claim on an analysis of U.S. Census data.
Little left over
With half of income going to pay the rent, that leaves little for the rest of life's necessities, such as groceries, health care and child care.
The rental situation in the U.S. is a crisis, the group says, and is getting worse.
“The lack of rental homes is pervasive and affects working families, seniors and children across America, said Angela Boyd, vice president of advocacy at Enterprise Community Partners. “No community – be it urban, suburban or rural – is immune.”
The analysis of 2013 Census data finds rent shock is most severe in Florida, New Jersey, California and New York. In those states, 30% of renters pay at least half of their income toward housing costs, including rent and utilities.
But even in traditionally more affordable markets in Ohio, Alabama, Maine and Tennessee, the group says about a quarter of the people renting their homes pay more than half their income to do so.
Credit and finances a barrier to buying
A recent Zillow report shows buying a home is becoming a much better deal in more and more housing markets. But the company says a survey of renters found half reporting that either their credit or finances prevented them from becoming homeowners.
Eighteen percent said they can't afford taxes, maintenance and other costs associated with homeownership, while 13% said they don't have enough savings for a down payment. About a quarter said they struggle, as it is, to pay their rent.
The survey also showed that 82% of renters are long-term renters, and 57% are long-term renters who have lived for a long time in the same home. Under normal circumstances, these are the people that eventually become first-time home buyers.
Not simple math
"If the buy versus rent decision were about simple math, we'd likely have millions more homebuyers in the market, because the equation is tilted heavily in favor of buying," said Zillow Chief Economist Dr. Stan Humphries.
Humphries says there is no right or wrong choice when it comes to buying or renting, but says the survey demonstrates that a lot of renters who might be better off financially as homeowners are still shut out of the market.
Among the top 35 metro areas in the U.S., the Dallas-Fort Worth market showed the fastest rate in which a home buyer reached the break-even point over renting – 1.2 years. Indianapolis and Detroit were next at 1.3 years. The national average is 1.9 years.
Since the financial crisis of 2008, fewer people have purchased homes and more, either by necessity or choice, have rented their homes. With demand increas...