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U.S. households paying the nation’s median monthly rent of $1,179 in August needed 30.3 percent of their incomes to cover the cost, up from 29.4 percent a year earlier, according to real estate website Zillow after it studied data from 50 of the nation’s biggest cities.
Housing is affordable when rent absorbs no more than 30 percent of income, economists say; if rent takes more of a paycheck than that, households typically have to pare spending in other basic areas.
Rental rates fell during 2020’s last three quarters but began rising again as the COVID virus came under control.
According to data from RealPage, a real estate data analytics firm, rents in America rose 10.3 percent annually in professionally managed apartments in the third quarter of 2021. Simultaneously, vacancy rates plunged below 3 percent for the first time in some thirty years. Adjusted rents rose by $150 from the start of the pandemic to $1,580.
TREND FORECAST: The salary of the average American rose around 4.5 percent (annualized), so far this year. Therefore, with the spike in rentals, plus the cost of food, gas and essential items dramatically increasing, the middle class will keep sinking as inflation keeps rising.
TRENDPOST: As we have said repeatedly, most recently in “Rents Soar as Investors Buy Properties and Raise Rates” (14 Sep 2021), soaring rents steal funds that households otherwise might be able to save toward a down payment on a home to own.
High rents, goosed in no small part by private equity firms snatching up single-family homes and charging premium rental rates, will limit wealth creation among younger generations, which already are burdened by student debt and a precarious job market. (The typical Gen X’er—41 to 56 years old —is toting $134,869 in debt, according to a recent study by mortgage broker LendingTree.)
These limitations will foment political unrest and amplify calls for debt relief, guaranteed incomes, eviction exemptions and other “give more to the poor” proclamations. Indeed, this will drive the formation of new socialist political movements in America… and around the world.