Rent is a problem.
A report Monday from Bloomberg’s Patrick Clark highlights a study that finds the number of American households that spend at least half their income on rent could rise 25% in the next decade.
And the worst part of the study show that even if wages rise, the situation won’t improve that much for renters.
If wages rise as expected, things will get a lot worse.
Clark writes (emphasis added):
“Even in the best case posited by the report, with wages growing a full percentage point per year faster than rents, the number of severely-cost burdened households will barely fall, from 11.8 million in 2015 to 11.6 million in 2025. In the baseline scenario, where rents and wages (and inflation) increase at 2 per cent each year, the researchers expect the number to reach 13.1 million.”
And so, if we see the wage growth and inflation that economists and the Federal Reserve are hoping for, more Americans will still spend an unreasonable chunk of their salaries on rent. About 30% of monthly income spent on rent is considered the norm.
Rent has been skyrocketing as the demand for rental units has surged in recent years.
And it’s mostly young people — millennials — that are choosing to rent instead of buy.
Last month, we highlighted that the only place in the economy that’s seeing serious inflation is housing.
And this chart says it all.
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