More people underwater in rental agreements: report
As the economy continues to sag like a braless Jane Fonda, there’s at least been one silver lining about housing.
Namely, that we don’t have to buy it. If there’s been any solace to the downturn, it’s that many more have taken comfort in renting. Not the finest investment, sure, but it’s (generally) less expensive than buying a home and about fourteen thousand times less responsibility.
Of course, the “renting is safer in times of turmoil” theory only works when our incomes stay flat. Which, at least in some places, they’re not.
According to a new report out of the U.S., rent has stayed flat but incomes have shrunk – meaning, quite literally, people are drowning under their rental agreements now, too.
By 2010 Census data released this week, median rent remained stable in the U.S. ($855 per month) from 2009, though median household income, adjusting for inflation, fell about 2.2 per cent.
*Bing: Why renting might be a better idea than you think
The result? Now, the share of renters spending 30 per cent or more of their household income on rent has shot to 53 per cent of Americans, from 50 per cent just two years earlier. Worse, the share of renter households spending half or more of their income on housing raised a full percentage point to 27.4 per cent last year, compared to 2009.
We won’t pretend to dive into the “rent vs. buy” debate just now, but the Yankee data does give us to pause to wonder what percentage of income should be devoted to rent in the first place.
By the estimates of a few, we’re talking in the 30 per cent range, anyway. CNN Money says 25 to 40 per cent is accepted, while BetterBudgeting.com notes 35 per cent ought to be the absolute max, and that’s accounting for hydro, utilities, maintenance and everything else.
If you rent, or you rented, what’s a good earmark as a percentage of income to spend on housing? Is 50 per cent way, way too much, or simply the norm for people that live in cities where rental prices continue to soar?
By Jason Buckland, MSN Money
Posted by: Steve | Sep 23, 2021 9:00:16 PM
Housing 'should' consume no more than 25 percent of one person's income. However people have lost sight of that and thus our present economic mess. On the bright side the impending global meltdown might help balance things out a bit
Posted by: Troy Jollimore | Sep 24, 2021 9:56:31 AM
No, it won't. Back when common sense prevailed, the 'rich' took it on the chin as well when times get tough. Now, when companies see anything less than last years uber-profits as a LOSS, the rich are taking that to heart as well. They don't see as much income as in the boom years? Boost it back up through other means, like raising rent for your tenants...
When I made ~$26k a year, we lived in a 'low-end' part of town, and our 2-bedroom apartment cost ~7200/yr. So that hits around the 30% mark. Now keep in mind that income is now considered 'median', and rents have increased a LOT since then. A two-bedroom in a 'good' part of town now goes for ~14k a year. So I'd say that the 50% margin is mostly those that rent above their means (since they can't BUY above their means doesn't cure the addiction), but now you're talking about living in a nicer apartment in a lower-crime area, as opposed to buying a 4000sq.ft. house vs. a 3000sq.ft. house. So what you see isn't so much luxuries being cut anymore, it's ESSENTIALS...
And since the rich are getting richer, they usually step in and buy up the 'bargain' properties that would be a stepping stone for those trying to struggle out of that circle. Since they can afford to drive the prices up beyond what the 'poor' person can afford, they then turn it into another income property. More luxuries for the rich, less essentials for the poor. The little guy doesn't have a chance anymore.
Even now that I'm making more (my wife still doesn't), 'getting ahead' financially means owning a mini-home on a rented lot. Although it could be used as a down-payment on a 'starter' home, the prospect of tripling my mortgage payments (back to around 30% of my income) until I RETIRE doesn't appeal to me. Especially when you know the housing is way overpriced AND in this economic climate...
Posted by: dea | Sep 24, 2021 11:23:59 AM
It is not just rent that takes a toll on your finances. I own ( no mortgages on any of them) rental properties and see many of my tenants have much nicer vehicles than me. Their rent may be 30% of their income but I bet the payments on a new BMW or Mercedes costs more than their rent. They are the 1st ones to complain when the rents go up saying they cannot afford it.
Posted by: FP | Sep 24, 2021 12:48:44 PM
Very offensive metaphor to start this piece with. Do you think disparaging personal remarks really are funny? or punch up your writing?
You are wrong.
Posted by: Elmo | Sep 25, 2021 1:16:25 AM
@FP... Buckland is a brash young news "writer" and I use the term loosely. Just look at his profile at the top right hand side. He often pushes his "homeboy" jargon a bit too far and should not be taken seriously... as a "writer" or in real llife. Obviously couldn't cut it in the real media world, therefore he throws his inane crap on the MSN blog line. In comparison to Gordon Powers, who actually has meaningfull insights on many financial topics, Jason Buckland is akin to a yappy annoying chihuahua.
Posted by: To Elmo | Sep 25, 2021 10:12:44 AM
Yes Elmo, I agree with you on Jason Buckland. I really despise that a person such as Mr. Buckland is allowed to come on here, through a blog, get people arguing. It's sad.
However, Mr. Powers is good. Agreed.
Posted by: Western Guy | Sep 26, 2021 12:20:15 PM
At Troy
You very clearly outline the classic financial fantasy. Wealthly people can afford to make an investment and make money on it while I can't.
That line of thinking is totally false. The economics are the same for all of us. If I can buy a rental property and rent it out and make money than I paid a fair price. You have the same opportunity to do this if you so choose. You somehow assume that the rules of economics are suspended for wealthy people and that they simply become wealthier doing something you can't make money at?
As a landlord I do agree that my renters often seem to have more disposable income than I do. Right now one drives a porshe and another a hummer. Me, I have a 5 year old vehicle and some nice rental properties. Each to their own on the decisions to be made in their lives.
I also disagree with the article. As the economy rises I am able to charge more on rents but as the market drops so does my rental prices. I have units that I charged more on in 2008 than this year. It is just the way the market works if you want to keep your units filled. People hung up on rentals are only caught in the short-term.
I would attribute the changes to people's refusal to surrender their gains. Regardless of the change in economy and changes in a person's income they will be very reluctant to give it up for less. We all need to always consider ourselves advancing, what else is the point in life?
Posted by: Q | Sep 30, 2021 1:18:16 PM
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