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Chrisman's Corner: Rental Affordability Crisis

Many cities that JMAC’s brokers are in are experiencing a rental affordability crisis as rent continues to increase. And our brokers are saying that this is increasing the motivation to buy a home rather than live in an apartment or rent. 
 
A numbers of factors have increased rental burden among households due to a greater demand for renting after the crash of the housing market, underinvestment in new rental construction, shifting preferences to urban living and slow wage growth. Western cities are the leading edge of diverse renters therefore Zillow’s rental burden analysis focused on six major western cities: Denver, Los Angeles, Portland, San Francisco, San Jose and Seattle. 
 
Rent tends to be lower for households with a high rent burden, but most of the difference between low and high rent burdened households can be contributed towards household income. For households with the lowest rent burden, the median income is four to five times the median household income among households with the highest rent burden. In San Francisco, it’s about six times higher. Among households with the highest rent burdens, half of the household’s income is dedicated towards rent. The highest rental burdened households spent 68 cents of every dollar on rent, whereas the lowest rental burdened households spent between 14 and 15 cents of every dollar on rent. Half of the households with high rent burdens in Denver, Los Angeles and Portland and one third in San Francisco, San Jose and Seattle live in poverty!
 
Households with higher rent burdens live in smaller, older units and overly burdened renters tend to be older. High rent burden households are more likely to have children living with them, are more likely to be single parent homes and spend more time commuting via public transit. And Millennials are overrepresented in low rent-burdened households: in San Francisco, 42 percent of people living in households with low rent burdens are millennials, compared to 27 percent in high rent-burdened households.
 
At some point a rent payment, among other factors, nudges a person from being a renter into buying a home. And as rents increase JMAC’s brokers are seeing more and more move in exactly that direction.