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Higher Rent Costs Hurting Middle-Income Americans

Posted On March 10, 2020

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New data reveals it is not just low-income Americans who are feeling the pain from rising rents.  Middle-income Americans are also finding themselves “cost-burdened.”  The Joint Center for Housing Studies of Harvard University revealed more than 10.9 million renters spend more than 50% of their income on rent. 

Renters are considered “cost-burdened” when they spend more than 30% of their income on rent.  Those spending 50% or more are severely cost-burdened.  Unlike homeowners, renters are not investing toward anything with their monthly rent payments.  With each mortgage payment, homeowners are building home equity, that can be accessed responsibly through a cash-out refinance.  Mortgage professionals typically recommend waiting until you’ve built up at least 20% equity in your home before withdrawing home equity.

As rental rates rise, and renters are spending larger shares of their income on rent, saving for a down payment becomes increasingly difficult.  Although low-income renters are the most affected by rising rents, shares of all income brackets are severely cost-burdened.

Severely Cost-Burdened Renters in 2018

Income Level

Share of Renters Severely Cost-Burdened

< $15,000

72%

$15,000 - $30,000

43%

$30,000 - $45,000

56%

$45,000 - $75,000

27%


Many renters could easily afford a mortgage payment, especially when they are already paying rising rents each year.  Saving for the down payment remains the biggest obstacle.  There are numerous low down payment and down payment assistance programs available to help renters, especially those who are first-time home buyers, get over the down payment hurdle and buy their first home.  As of 2019, Down Payment Resource reports there are 2,451 homeownership programs available to help with down payment assistance and closing costs.

If you are currently renting, and want to discuss home buying options, let us know.  Buying a home this year may be more achievable than you think. 

 

Sources: Down Payment Resource, MarketWatch