Americans Can't Even Afford Rent

Americans are struggling to pay their rent this month, according to a new report from Harvard University's Joint Center for Housing Studies.

In the report, half of all tenants spent more than 30 percent of their income on rent and utilities; and even among middle-income renters, the percentage had risen 5.4 points from 2019 through 2022.

"Over the last two decades, housing unaffordability has been climbing the income ladder and is increasingly affecting middle-income households," Sophia Wedeen, a research analyst at the center, told Realtor.com. "For people with lower incomes, housing unaffordability is a fact of life."

Altogether, 22.4 million households were paying more than the 30 percent recommended amount towards housing, and 12.1 million households were defined as "severely cost-burdened." This meant more than half of their income went toward housing.

Across two decades, from 2001 and 2022, rent climbed 21 percent when adjusted for inflation. This is in stark contrast to renters' incomes, which only grew by 2 percent.

But what exactly is driving the exorbitant costs?

Lack of supply for affordable rentals is the obvious answer, and many landlords who originally cut prices during the pandemic are now boosting them way beyond the means of a low-income renter.

Americans typically turn to rentals when they are not able to buy a home, and homeownership rates among 25- to 45-year-olds were found to have fallen the most of all age groups since 1980, according to the Terner Center for Housing Innovation at UC Berkeley. The high cost of renting is now causing many to make some real sacrifices.

Due to this, renters say they are spending less on food and healthcare to keep a roof over their heads. There is also a record level of homelessness as many simply can't make the prices work.

Real estate and finance expert Andrew Lokenauth, also the founder of TheFinanceNewsletter.com, said areas with strong job growth like California, New York, and Washington have the highest rents, especially due to limited housing availability.

"Many jobs don't pay enough for people to rent decent places near their work," Lokenauth told Newsweek. "Not enough new apartment buildings are being built for lower and middle incomes."

Earlier this year, 24 percent of renters said they couldn't afford their rent, in a report by Intuit Credit Karma, a free credit and financial management platform.

The rental dilemma was especially pronounced for Gen Z (12-27 years old). Roughly 31 percent live with their parents and 27 percent say they can't afford their rent.

The problem extends past age though. Even 42 percent and 25 percent of Gen X (44-59-year-olds) and Baby Boomers (60-78 years old) say they are compromising on necessities to pay their rent, and 46 percent of all Americans believe they will never own a home, the study found.

While renters are largely unable to truly afford the high-cost rents, there is a sign of some better things to come. Rents only grew by 0.4 percent for the third quarter of 2023, which is a significant difference from the 15.3 percent surge experienced by renters in early 2022.

Despite the increases, renters' homes are aging significantly, and the safety of many of these units is often called into question.

The typical rental unit was 44 years old in 2021, the report found. At the same time, however, around 436,000 new apartments and other units were added in the third quarter of 2023.

This was the highest amount in 35 years, also signaling prices might not grow as rapidly as before—as the supply increases, landlords will likely be forced to bring down prices for renters who have more options than previously.

If you are struggling to pay your rent and would like to share your story, please reach out to personalfinance@newsweek.com.