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Economists believe that a household can best afford to rent when the rent does not exceed 30% of income. Unfortunately, 26% of households are paying more than 50% of their income for rent. That is the highest percentage in 50 years. It is explained by falling income due to the downturn and by rising prices for rents. The supply of affordable rental housing is down because developers cut back on projects in 2009. Demand is up due to foreclosures which have turned owners into renters, and by an improving market for 20 somethings which has enabled many to stop living with their parents.
Given the high share of income for low to moderate income households going to rent, and the rising prices for gasoline, there is not a lot left over for these households to spend on other than bare necessities. This does not auger well for the recovery.
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