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Rising home prices fallout: Greater rent burden destroying the dream of homeownership

By Anthony SanFilippo
December 2021

Jimmy McMillan may have been ahead of his time.

A perennial candidate in New York for various offices, McMillan created a single issue third party that ran on the notion that the rent was “too damn high.”

Now, in an era where millions of Americans were adversely affected by a global pandemic and with national moratoriums of evictions no longer in place to protect renters, it turns out that his message is ringing true—especially for low-income Americans.

Rental costs have increased sharply in many parts of the country, swallowing up a larger share of the monthly income of many Americans who have no more holes on the belt to tighten as inflation has ballooned other costs as well – including food and gasoline, among other necessities.

According to data from Zillow, a real estate company that tracks affordability, the median U.S. rent was $1,179 in August, which is now 30.3% of the average renter’s monthly income. It’s a jump of nearly one full percentage point from August 2020.

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By exceeding 30%, rents are no longer considered affordable by economists, as that threshold makes it harder for renters to stay afloat with other bills and necessities, let alone save the money needed for a down payment to buy a home.

Rents are skyrocketing as housing providers look to catch up on lost revenue created by the pandemic and the moratorium that protected tenants from being evicted for a failure to pay the rent.

According to Moody’s Analytics REIS, rent prices could increase by 10% when all is said and done in 2021.

Zillow data show that the median rent in the U.S. increased by 6.1% from August 2020. But that in some cities, it was even worse.

In Sacramento, Calif., the median rent jumped 8%, taking 34% of the renters’ monthly income. In the Miami-Ft. Lauderdale area, the rent surged 8.6%, taking a whopping 40.3% of a household’s monthly income.

Increase Impacting Black and Latino renters

Not surprisingly, there was a vast difference between white and Asian renters, and Black and Latino renters.

Black renters were spending 34% of their monthly income on rent nationwide.  Latinos were spending 32.1%, while whites were spending 28.6%, and Asians 26%.

In San Diego alone, nearly 53% of a Black renter’s monthly income was going toward rent. If 30% is the threshold for being “rent burdened”, what would be the descriptor for nearly double that?

In a statement provided to San Diego public television station KPBS, Mayor Todd Gloria said, “The results of this study are infuriating, but not surprising” and added that his top priority as mayor is “to ensure that all San Diegans have a roof over their head at price they can afford.”

According to the KPBS report, Mayoral spokesman, David Rolland, said the city has already invested in rental assistance programs and launched several business and youth development programs aimed at San Diego’s communities of color.

But those programs take time to become effective. Until then, what will happen to these renters who now have to worry about keeping a roof over their head, never mind planning to save up to buy a home?

One argument is rent control. But while that may have an immediate impact, long-term it does nothing to improve housing affordability. Tenants will hang on to homes with affordable rents longer, creating an even greater demand for housing and less available stock. It also puts a cap on new development, where incentives can be provided to developers to build new residences that are affordable for low-income residents.

The other option is to allow those developments to take place. And, while there are some that do so with the agreement to provide affordable units for a period of time, once that time period expires, those rents also skyrocket.

Then there are traditionally Black or Latino communities that are in tracts where tax incentives are offered for new development, and the current residents become displaced while more high-end homes are built in these desirable locales, basically allowing for a regentrification of certain communities.

It ends up being a lose/lose scenario for the Black or Latino renter who is trying to stay in a home and save for a better home down the road.

Take Austin, Texas for example.

A little more than a decade ago, Austin was identified as one of the most affordable cities in America to live.

“It ends up being a lose/lose scenario for the Black or Latino renter who is trying to stay in a home and save for a better home down the road.”

A 2010 study by Forbes ranked it the 10th most affordable city in America to buy a home. Two other Texas cities – San Antonio and Houston – also made the top 10. At the time, this is what Forbes wrote:

The Lone Star State has long enjoyed the benefits of a business-friendly tax climate, rich natural resources and a stable housing economy. As a result, jobs are available, but costs low enough that Texans can stretch the fruits of their labor further. That combination is enticing to Americans seeking to relocate.

In 2021, according to Zillow, Austin will become the least affordable city to buy a home in America outside of California, having already surpassed traditional hot beds like New York City, Miami, and Boston.

The median home price in Austin in October was $536,000. A year earlier it was $441,250. In 2011, right after that Forbes article, it was $211,000.

So, if home prices are going up, what about rents?

Oh, they’re increasing too. The average rent of an apartment in Austin is now $1,600.

According to activists interviewed by the New York Times regarding Austin, these surging prices have created a housing crisis that is reshaping the city by pushing mostly low-income Black and Latino residents away from cultural centers, transportation hubs, grocery stores and other amenities that come with urban living.

Roughly 13% of the residents of Austin live below the poverty line, and yet, in 2020 it was one of the top cities in America in housing development, building 42,000 new homes. But where are the people going who used to live in those neighborhoods?

Austin finally created a position for a displacement officer in 2020, and even though there is roughly $300 million to spend over the next decade-plus to ensure displaced individuals and families can still live in their preferred communities, it likely won’t be enough .Austin is a booming tech corridor, with major companies like Amazon, Apple, and even Tesla setting up shop there, bringing with them high-paying jobs and a younger, more affluent population of residents who are making cash offers or overpaying for properties. This is making it challenging for middle income earners, let alone low-income earners, to find a place to live.

The recently passed infrastructure bill that the Biden Administration pushed through Congress included $150 billion in federal spending for affordable housing, which includes more than three times the current budget of the Department of Housing and Urban Development.

It’s a good first step to help the crisis, which is now engulfing the entire country.  but that’s all it is – a step.

“We are one step closer to achieving historic housing investments and keeping the country’s lowest income people affordably housed,” Diane Yentel, president and CEO of the National Low-Income Housing Coalition told The Hill in October. “But we’re not done yet.”

Far from it.


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