Number Of Americans Who Spend 50% Of Household Income On Rent Growing

Date: September 23, 2015

Number May Grow By 25% Over 10 Years, Study Warns

According to a new joint study from Harvard University’s Center for Housing Studies and Enterprise Community Partners, the number of renters who will spend at least 50% of their monthly incomes on rent will grow over the next 10 years, with 11% more households becoming “severely cost-burdened.” Bloomberg News noted that of the 14.8 million households the study projects will be “severely cost-burdened” by 2025, more than 1 million will be headed by Latinos and another 1 million by senior citizens. The study examined “various scenarios for wage and rent growth over the next decade,” with the “best case” having wages growing 1% faster than rents annually. In this case, there would be a slight decline in cost-burdened renters, to 11.6 million in 2025. However, with rents and wages both rising 2% annually, there will be 13.1 million cost-burdened renters by 2025. According to Enterprise Community Partners senior research director Andrew Jakabovics, “The economy alone is not going to solve this problem. It brings us back to the need to expand affordable housing,”

The Wall Street Journal noted that in 2013, 25% of renters spent at least 50% of their monthly income on rent. This represented about 11.2 million households, and was 3 million more than in 2000. The Journal noted there are possible federal policy implications from the rising number of cost-burdened renters, as these renters generally need federal housing subsidies to afford housing. However, many of these subsidies have been reduced in the past few years.

What This Means For Small Businesses

Small businesses may be affected in numerous ways by rising costs of living. For one thing, small business owners and their employees may be increasingly unable to live in the city where they work, forcing longer commutes or relocations of their businesses altogether. Small businesses in the construction sector may be particularly affected by rising housing costs, which could slow demand. Rising housing prices will also leave consumers with less spending money for businesses in their communities. All around, this report is bad news for small businesses.

Additional Reading

Also covering the story are Fortune, Newsweek, the Washington Examiner, and Atlantic.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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