Consider This from NPR - Rents Take A Big Bite

Episode Date: February 16, 2024

Rent has skyrocketed in the United States. That means Americans are handing over a bigger portion of their paycheck to their housing costs. They have less money for things like food, electricity, and commuting. The pandemic and inflation have both played a role in pushing rents higher.Whitney Airgood-Obrycki a Senior Research Associate at Harvard's Joint Center on Housing Studies says rents are actually going down, but that increases have been so large it's going to take time for the market to even out.We look at how rent prices got so high and what it might take to bring them down. For sponsor-free episodes of Consider This, sign up for Consider This+ via Apple Podcasts or at plus.npr.org. Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Whitney Ergode-Obricky knows a thing or two about the rental market in the United States. I'm a senior research associate at the Joint Center for Housing Studies of Harvard University. Ergode-Obricky's whole job is tracking how much it costs people to rent a home. We're seeing a record high number of cost burden renters. Cost burden. That's research speak for how much of someone's income goes to their housing costs. And in 2022, the latest year for which there's data, the cost burden on renters was huge. We're also seeing that now half of all renters are cost burdened. That data represents real people, 22.4 million of them,

whose housing costs overwhelm their incomes. People like Genuine Campbell. Do you want to pay the bills and then get half the rent? Or do you want to try to do the whole rent and then be back on bills? The single mother of four is a Lyft driver and lives in Philadelphia. She was living in a two-bedroom apartment. Her rent went up from $1,300 a month to $1,600. Now she's looking for a cheaper apartment for her family,

something around $1,000 a month. It's like you're dreaming of a fairy tale, but I'm going to try to find something that I can handle and I can manage. On the other side of the country, in Albuquerque, New Mexico, Natalie French and her roommate were paying $1,200 for two bedrooms and two bathrooms. Then they found out their rent was going up. They gave us a notice that the rent was going to be going up by $225 a month. So it was going to go up to, I believe, $1,350, basically. Then there were pet fees, and so that was totally out of our price range. They caught some lucky breaks, her roommate getting a better job, her roommate's partner chipping in for rent,

and they got creative, promising to do yard work for their landlords. So French and her roommate found another place to live. But the group can't keep up with that yard work, so they're on the hunt for housing again. What that means for me, actually, is I'm going to be moving back home to Louisville to live with my mother. I would love to be able to afford a place on my own, but with my salary, that is not feasible. The thing is, rent taking up most of a paycheck, it's a problem for people of all incomes. That was another thing Ergo Dobricki, the housing researcher, found in the data. We actually saw increases across every single income category that we look at,

which sort of surprised us. Jeff Witteman of Anaheim, California, is married with two incomes to put toward rent. More money overall, but it still took Witteman and his partner months to find a place they could afford. And during that time, Witteman was commuting a total of two hours a day to his job as a scientific aide for California Fish and Wildlife. The kind of like two-hour commute each day was a little much. So I ended up getting a gym membership and kind of just sleeping in my car overnight

and like kind of like Walmart parking lots, gym parking lots, just so I wouldn't spend, you know, like 50 bucks in gas and four hours each day driving to my job. Whiteman and his spouse are now settled in what he describes as a nice apartment complex. And that cost burden, how much of their income goes toward rent, it's not terrible, but it's still significant and leaves him weighing how much to spend on small luxuries like going out to eat. A couple times a month we'll go for the $10 Costco pizza, and that'll be a good couple meals there. Consider this.

The cost of rent in America has grown so large that for millions of Americans, there is little money left over to pay for life's other necessities. Coming up, we look at the reasons why, and what it will take to reverse the trend. From NPR, I'm Camilla Dominovsky. It's Friday, February 16th. It's Consider This from NPR. Rent has skyrocketed in the United States. That means Americans are handing over a bigger portion of their paycheck to their housing costs, leaving less money for things like food, electricity, and commuting. The pandemic and inflation have both played a role in pushing rents higher.

But Whitney Ergood-O'Brickey, senior research associate at Harvard's Joint Center on Housing Studies, says it's not all bad news. In some markets, rents are actually going down now. But we're in such a hole from those massive rent increases that it's going to take a little while to get ourselves out of that. NPR's Jennifer Ludden covers housing. I talked to her about how we got here. So there are a lot of factors, but I would say there's one big one that underlies them all. And that is that the U.S. has a massive housing shortage. It goes back to the 2008 housing crash. A lot of home builders went out of business. And really for a decade,

economists say the U.S. did not build enough, and that has led to an incredibly tight market. So that helps explain why. And then we had the pandemic, and people started going remote, moving all over the country, and you really saw rents skyrocket, double-digit increases, brutal bidding wards for home sales and also rentals, because there just was not a lot out there. In some places, vacancy rates hit 1% and 2%. Then on the heels of that, there was high inflation and skyrocketing mortgage rates. So that meant a lot of people who wanted to buy a home got priced out. They are now stuck renting, which makes the rent market even tighter. And one other big factor, you know, wages just have not kept pace with rising rents. Over the past two decades, according to Harvard's Joint Center for Housing Studies,

median rents went up a whopping 21%, but the median income for renters, only 2%. 2% over 20 years? Wow. And when prices rise in general, it's often the lowest income Americans who feel it the most. Is that the case here? It is, but they're definitely not the only ones. Because again, prices are up across the board. In fact, the Harvard study finds middle income renters making between about $30,000 and $75,000 were the most likely to see their rent go up to the point where it became unaffordable. And even people working full-time, the study found one-third of them cannot afford their housing costs. But absolutely, for the lowest income renters, they are squeezed the

hardest. Harvard finds that a record 83% of them now pay more than a third of their income for rent and utilities. And for a very big chunk of that, it's more than a third of their income for rent and utilities. And for a very big chunk of that, it's more than half their income. And, you know, there is a striking racial disparity. Black and brown people are disproportionately rent burdened. They're also much more likely to be evicted, which, of course, makes it even harder to find a place to live. We just heard one renter, Genuine Campbell, say she has to juggle pay the rent or pay the bills. If people are spending most of their income on rent, how does that affect the rest of their budget?

Yes, there is not much left for many people. You know, the researcher we heard from, Whitney Arriga-Nobricki, says for the lowest income renters, the amount left has dropped almost in half. And the things that people used to do to find cheaper housing don't always work anymore. So you might not be living in as good of a neighborhood, you might be commuting farther, you might be sacrificing the quality of your school system to try to live in affordable housing. And often what we're seeing is that even when people are attempting to make these trade-offs, they still end up paying too much for housing. She says research shows that when faced with this, people spend less on things like food, less on health care. They don't save for retirement. They may not be able to save at all. They rack up more debt. U.S. credit card debt is at a record level and delinquency rates for all

kinds of debt are up. And, you know, for people who want to eventually buy a home, high rents make it a lot harder to save up for that. At the same time, we're also hearing that the market for people who want to buy a home is cooling off a bit. Is that also happening with rentals? It is, yes. This past year, Redfin says nationwide rents only rose about 1% on average. And they've even dropped a bit in some places that have been really overheated. A main reason for that, you know, even though there is a massive housing shortage, there is a

lot more construction now. Our colleague Scott Horsley spoke with Kim Bettencourt, who tracks the rental market for Fianney May. Right now, underway, what I call holes in the ground, cranes in the sky, a million units. That's a lot. We need it. We absolutely need it. But it's primarily concentrated in about 15, 18 metros. And to be clear, even in those places, it's only going to help so much. Most new construction is at the higher end of the market. There's a lot of demand for that. Plus, land and construction costs are so expensive. It's just not profitable to build low-cost apartments unless you have government subsidies. All right. So there's this massive shortage of affordable housing.

The market, despite new development, is not going to be able to fix it on its own. So what is happening to try and create places that people can actually afford to rent? There is a lot going on in states and cities. Okay, for one thing, a growing number are starting to open up their zoning. They're allowing townhouses and small apartments in places that have long been restricted to single-family homes. Now, this is controversial. There are lawsuits.

Many worry that these multifamily buildings are going to ruin their suburb. And not everything that gets built this way is really that affordable. But the idea is to add supply to the market and over time bring prices down. Another zoning change, some places are requiring or encouraging developers to include a specific number of low cost units in a building. We've also seen voters in dozens of places approve spending to build new affordable housing. And there's a really active tenants' rights movement. You've seen groups around the country have helped pass rent control in some cities. That's also controversial. Some economists say it can lead to fewer low-cost places because

developers need to make money. And if they can't, they won't build as much. But activists say, look, construction takes years, and there are so many renters who need relief right now. Yeah. And so bottom line, what is the reality right now for people who can't escape rising rents? Okay, well, I would like to just note a very important but harsh reality. As rents have gone up, we have also seen homelessness rates rise. And there are certainly a lot of reasons someone may end up living on the street. But a landmark study in California last year found unaffordable rent was a really key part in why many lost their housing. For others, you know, people have always moved for cheaper housing. These days, you may have to go farther. The website Apartment List says a lot of renters are moving to different states where housing costs less. For a while, we've really have whole buildings now that are designed with private bedrooms and shared living spaces to help bring down the rent. It does seem like it's going to be a tough market for a while.

And, you know, like the renters we heard from, people may just need to get creative to find ways to get by. That was NPR's Jennifer Ludden. This episode was produced by Brianna Scott. It was edited by Catherine Laidlaw and Courtney Dorning. Scott Horsley contributed reporting. Our executive producer is Sammy Yenigan. And thanks to our Consider This Plus listeners who support the work of NPR journalists and help keep public radio strong. Learn more at plus.npr.org. It's Consider This from NPR. I'm Camila Dominovsky.