Skyrocketing rents hit 'crisis' level

The trickle-down effect of a decline in homeownership has put more rentals out of reach.

By MSN Real Estate partner Dec 9, 2013 12:53PM

Home with for rent sign (© VStock LLC/Tetra Images/Corbis)By Diana Olick, CNBC

 

Since the housing crisis began in 2008, approximately 4.6 million homes were lost to foreclosure, according to CoreLogic. The vast majority of those homeowners became renters. Even as housing recovered, credit tightened, pushing even more potential buyers out of homeownership and into rentals, both apartments and single-family rental homes.


There are now 43 million renter households, or 35 percent of all U.S. households, the highest rate in over a decade for all age groups, according to Harvard's Joint Center for Housing Studies; 4 million more renters today than there were in 2007. For those ages 25 to 54, rental rates are the highest since the center began record keeping in the early 1970s.

 

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As a result, rental vacancies have fallen dramatically, and rents have skyrocketed.

 

"We are in the midst of the worst rental affordability crisis that this country has known," said Shaun Donovan, secretary of Housing and Urban Development.

Half of all U.S. renters today pay more than 30 percent of their incomes on rent. That's up from 18 percent a decade ago, according to the Harvard center. For those in the lowest income brackets, the jump is even worse.

 

"Over four years, a 43 percent increase in the number of Americans with worst-case housing needs," Donovan said. "Let's be clear what that means: They're paying more than half of every dollar they earn for housing."

The numbers are not lost on Annie Eccles, who is in her late 20s. She has been renting for more than two years, and the rent on her Bethesda, Md., apartment has increased by the maximum the county allows every year.


"It's frustrating because we pay for rent, we also pay for parking, and just knowing that every June it's going to increase significantly, it's frustrating," Eccles said.

And Eccles pays almost as much each month on student-loan debt as she does in rent. Put together, it makes it hard for her and her husband to save up enough to buy a home of their own.


"It would be hard buying in this area, just because it's so expensive," she said.

 

Most younger Americans, like Eccles, want to be homeowners someday. While so-called millennials favor mobility and city living, they still see homeownership as a goal.

"Nineteen out of 20 people that are surveyed say that they intend to buy a home at some point in the future, if they're under the age of 30," said Eric Belsky, director of Harvard's Joint Center for Housing Studies. "There is no question that the will toward homeownership remains there, it's the way."


Home prices are rising faster than expected, because of heavy investor demand, ironically in single-family rental housing. While more than 3 million owner-occupied homes are now investor-owned rentals, there is still a lack of supply in the market. New rental stock is coming soon, but demand is not easing. Renters may want to be buyers but many still can't, because of rising home prices and mortgage rates.

 

"You add in other things, like higher student debt for many people, you add in the fact that incomes for low- and moderate-income people have not been going up as fast as inflation, and you have a situation where it's going to be very difficult to buy homes," Belsky said.

 

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Tags: rentals
 
448Comments
Dec 11, 2013 3:41PM
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My family has owned/operated rentals for over 30 years.  Rental rates are based on supply and demand.  If rental prices get too high, tenants go elsewhere leaving empty units, and so, in order to fill them, rates go down.  If rates are too low, you get the opposite effect.  Rentals, like the price of real esate, and just about everything else, are fluid.  It is a balancing act that you need to adjust according to conditions in your area.

Dec 10, 2013 1:02PM
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My American Dream is alive and well.  I just bought a home last year :)

My daughter is staying with me saving up to pay cash for a home of her own.

Just because some people lack the discipline to plan/save/sacrifice for homeownership, doesn't mean the American Dream is dead.

Dec 10, 2013 8:30AM
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Many banks do not allow reasonably priced condos to be sold to first-time home buyers with a mortgage.  They favor their rich, investor criminal friends.

 

That is partially why for many, home ownership is still out of reach.   Everyone should have the opportunity to own a home, like back in the 1950s.  

 

Because of the rich and greedy, the idea of the American Dream is now just that:  a dream.  Cause you have to be asleep to believe it.

Dec 10, 2013 6:38AM
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I appreciate the people who did responds to my comments both pro and con.  I guess we are all "griping" about things in general.  Regarding college, it just seems to be a present day reality that everyone should not necessarily attend college.  College in the guise of "education" of course is just another "industry."  Whether it is profit or non-profit.  There are many talented people in all endeavors will do well even without so-called "advanced" education and some who drop-out because college is just slowing them down.  I call attending college basically an "attendance certificate" simply because all of my time here on earth my teachers kept pushing to attend college or we wouldn't do well in our lives. No I'm not an "ingrate,' I attended three colleges and graduated from the last school. I also got a certificate or two from advanced courses. I think the internet like with the newspapers will put brick and mortar campuses out of business.


Regarding Bush spending money unnecessarily on "wars" I still haven't heard even ONE person in 12 years or so explain what they would've done after the event of 9/11.


Safe Holidays to those who "believe."

Dec 10, 2013 4:52AM
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The government should build housing or apartment complexes and let people in need live there on a sliding scale.  This would create competition for those who are raising their rent prices and the result should be lower rent prices, right?  Or would the perceptual outcome be that people in need are being funneled into "projects" in a veiled attempt to keep them out of "uppity" neighborhoods?  Then we would have a different kind of "crisis."  These poor people in need "forced" to live in the projects because they "can't get out" because the rent prices are too high.  People trying to climb the ladder are forced into renting substandard because rent prices are just out of their reach.  Yes, we have a crisis now and who are we going to blame; the "Landlords" of course.  Not the gov't for increasing fees and taxes or acknowledge the increasing costs of maintaining property.  We don't like supply and demand because it is actually "gouging" in disguise.  If the shoe were on the other foot, if those complaining were the Landlords; we would have the exact same scenario. (I am a very modest homeowner with a 45K dwelling many would likely view as beneath them...I stayed within my means...no over reaching....no complaints...no envy)  
Dec 10, 2013 3:44AM
Dec 10, 2013 3:31AM
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I recall when I was flying high and living the good life buying my own home and driving a new car and it was crash and burn the manufacturing company decided to close shop and send my job to China and not even a thank you for 22 years of work. I was force to get a lower paying job--nobody hires anybody over 50-and I had to sign up on section 8 if I wanted my family to live in a nice apartment. I finally found a house trailer that  I could afford to buy and buy it I did.


Lady luck can turn her back on you in a heartbeat so, watch looking down your  high and mighty long noses at those less fortunate then yourself because you're always one payday away from crashing and burning and joining their ranks...

Dec 10, 2013 3:19AM
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Foreclosure for Christmas.    My husband is a Firefighter-EMT, he loved to take care of people. He even used to pay for other peoples groceries in the check out lane if the thought they looked down on their luck or elderly on a fixed income. He worked two jobs, at the fire dept. and the hospital. I worked at the hospital also. We had no problems, planned a trip to Ireland even. Then he got injured during a training session at the firehouse. Cervical spinal injury. Two surgeries later still in pain. Could not work at all anymore. Then I lost my job. I'm still looking for work. House is $100,000 in the red. Could not refinance. Qualify for Making Homes Affordable Act but bank refuses to work with us. Apparently they make more money in the long run by foreclosing, taking the tax write off, then selling off the property. Our neighbors are not happy that we will be leaving as we have always helped them when we could and decorate for holidays and they look forward to our halloween and Christmas decor. This will be the last Christmas in our home, but we are still going to decorate and put up all the lights. Can't disappoint all the neighbors and kids and buses of seniors for christmas.

Dec 10, 2013 3:14AM
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this whole mortgage thing was the biggest scam to hit the country, I bought a party store and signed papers the day after 9/11 I was worried I was going to loose my ****. On the contrary, The former owner informed me that the plains hitting the towers was the best thing that could happen for me. Every one looses there jobs and have nothing but time and just enough money to drink with it. YOU ARE GONNA BEW RICH. That night out celebrating. my wife mentioned we were Democrats. The former owners explained to her. We were no longer Democrats, We were now republicans and we were to take the Dem's for every dime they were worth and when they cry they can not give more, Take it anyway. So you see The rich know how to take advantage of any situation. Kind of makes you not want to try any more? The same thing people have been saying about socialism, What kind of lies have they been feeding us about that? I myself am on diability, Due to the fact I cant deal with the mental struggles knowing I am getting ripped off going to work and ripped off when I buy the products. Its a real mental condition many people that realize what is happening get. Maybe now that I have explained it you will know too. better prepaire your self for the depression that goes along with it. I would start by applying for disability...
Dec 10, 2013 3:11AM
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I use to pay $750 rent, now I pay $379 mortgage.  The savings more than cover home ownership expenses.  I'm a happy camper :)
Dec 10, 2013 3:02AM
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I have zero pity.  Most people bring these negative financial situations upon themselves through bad planning and/or poor decisions.
Dec 10, 2013 2:51AM
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I don't want to mention the incredibly high percent of rent that I pay.  I don't make a lot but that rent takes up about 38 percent of my income. I pay it and that's it. I need to make more money. Right now I'm barely getting by. What bothers me is the woman down the road, albeit a friend of mine (I'll call her Mindy), who is renting a much bigger place than me. She has two kids, yes, and a boyfriend living with her who illegally sneaked into the country from Mexico. He's working for a house building contractor tax free, making about $600 a week, much of which he sends to his mother in Mexico.   Mindy is on disability because she's been depressed and this qualifies her for section 8 housing. She pays $43 a month for a 3 bedroom home with a nice big yard, garage and porch, all utilities subsidized.  She's not alone.  I know many like her.  They're on disability and paying a tiny amount for rent.  I know one woman who is on disability because her fingers get sore if she works too long.  The state not only kept her on section 8 housing, but later gave her several thousand dollars to buy a mobile home.  I work my **** off every day to stay afloat while she tells everyone how she's been skiing, fishing, and hiking, and does jobs around town under the table.  All this while I suffer in chronic pain from arthritis.  I sometimes wish I was disabled so could hike, ski, and fish again.  Section 8 means you're crazy and unfit in the military.  Section 8 housing, as far as I'm concerned, means the same thing.
Dec 10, 2013 2:34AM
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Consortiums, made up of the banks and wealthy elites, who oversold overpriced homes before the Bush Recession have repurchased 80% of their own auctioned foreclosures, and now plan to profit from them, pushing the cost of renting higher than the public can afford, for the sake of sociopathic greed. Legislation is needed to allow homebuyers protection from these predators in the auctions, so that the public gets some benefit from the foreclosure auctions, not the banks who took our bailout funds, and reinvested them in the same homes they bankrupted our nation over in the fist place!
Dec 10, 2013 1:54AM
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If renters don't like "high" rent cost, then they should buy their own house and then they can pay the high costs to maintain it including skyrocketing property taxes.  Oops, the renters you say are pushing up rental costs are the same ones who couldn't responsibly manage the costs of homeownership to begin with.  Ok, I'm on board now.  Clearly poor renters are.victims and should be given a free ride on the backs of the rich landlords and greedy corporations. 
Dec 10, 2013 1:42AM
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This is what happens when the odds are stacked up against you and can no longer save. Saving money has become a thing of the past and that's the way they like it. If you're saving it, you're not spending or consuming.
Dec 10, 2013 1:21AM
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My solution is to start kicking out the politicians that raise taxes and spend. Lower taxes and elect politicians who have business experience rather than a useless full time politician or community organizer. You keep electing people that have zero business experience and we will keep heading toward the gutter. Jobs are needed and many in DC do not understand that philosophy. They think that there is nothing wrong with printing more money while creating more dependency on government handouts (food stamps and welfare)..   
Dec 10, 2013 1:16AM
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 As a single woman who put herself through college...twice, I make decent money. If I were to become a home owner, I wouldn't be able to afford the upkeep on the home I could afford. I would be hiring out for repairs....an not the man down the street. I would need someone insured and bonded etc.... TOO MANY people out there lurking to do crappy work for a lot of money. Its just too hard to trust others.......This is why I rent
Dec 10, 2013 12:03AM
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If my wife did not work....I would not be able to survive. 
Dec 9, 2013 11:57PM
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No worries.  Obama will ensure that the 11+ million illegals in this country get to keep their jobs and live in affordable low cost housing by taxing American citizens.  He might ask you to move to the streets after his "amnesty for illegals" package gets passed to make more room for them.  A good president has to take care of his illegals...
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if it wasn't for capitalism you would be speaking german or Japanese the start of the industrial revolution help us win the wars and gave us our freedoms we enjoy today we have a president who follows socialism and that works good until the government goes broke remember what john f kennedy said don't ask what your country can do for you ask what you can do for your country and quit blaming every thing on bush he hasn't been president for 5 years put the blame where belongs and that is this administration we have now the big spender
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