Despite some improvements in the rising housing market, a report suggests that those with a less affordable income will suffer the worst of it. Here are the reasons why.
A Widespread Affordability Crisis
Rental affordability in the U.S. has become worse than ever, affecting both high and low-income tenants. The Harvard Joint Center for Housing Studies reported that half of American renters spend over 30 percent of their income on housing, reaching a record 22.4 million cost-burdened renters in 2022.
“I expected to see it worsen, but the degree to which it worsened, I think, was astounding,” noted Whitney Airgood-Obrycki, the report’s lead author.
Financial Strain Rising Rapidly
Middle-class tenants face the fastest-growing financial strain, with housing costs escalating, impacting households making $45,000 to $74,999 significantly. One reason for the surge is the pandemic, which triggered a rise in housing costs for renters of all income levels.
Middle-class households making $45,000 to $74,999 experienced a substantial 5.4 percentage point increase in housing costs after the pandemic.
Main Driver of Inflation
Although inflation is allegedly seeing improvements from December’s report, rent remains the main driver of inflation, outdoing all other factors. Rent growth for professionally managed apartments drops significantly in 2023, marking a long-awaited change.
Despite the slowdown in rent increases, costs are not expected to return to pre-pandemic levels, but at least it’s a positive for struggling renters.
“We may have come down from the all-time high number, but we’re probably still in pretty bad shape,” said Airgood-Obrycki.
Attempts to Address the Housing Crisis
Although policymakers have tried to address the housing crisis with emergency rental assistance, it seems the country is right in the middle. While new construction brings hope, the benefits won’t be evenly distributed, with higher-end markets benefiting more.
“Supply is very important. I will certainly underline that, but the people who are most cost-burdened are not going to see the immediate benefits of that supply,” Airgood-Obrycki confirmed.
Luxury housing continues to face high demand, meaning that prices are elevated in all areas of housing beneath it, meaning that those with less money suffer more. The more landlords prioritize higher rentals or higher-selling properties, the worse the shortage becomes as landlords hold less affordable properties.
Biden’s Failed Attempt to Curve Homelessness
The Biden administration attempted to keep a nationwide eviction ban to prevent a surge in homelessness, but the Supreme Court rejected it. In response to rising costs, the White House also introduced new measures last year after facing pressure to address the issue.
Although there have been significant improvements to the housing market, those with less income will be the ones who continue to suffer as housing prices continue to skyrocket.
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Featured Image Credit: Shutterstock / I Wei Huang.