America’s Rental Rates Hit A 15-Year High While Wages Are Slow To Catch Up
Jimmy McMillan is most famously known for his on screen outburst “The rent is too d*** high” speaking of rising rent prices in New York City. But the concrete jungle is not the only place in America facing quickly increasing rent costs with disproportionate wages unable to keep up. It’s a trend seen in your typical large urban spaces, but also in cities such as Atlanta, Denver and Nashville.
The Wall Street Journal reported that the main cause is simple supply and demand as millennials enter the job force and move across the States. The real estate market is finding a shift as new households opt to rent instead of buy as prices soar.
The number of U.S. households increased by almost 1.5 million in the first quarter of 2015, but this increase was mostly due to renters. The Commerce Department found that the home ownership rate has dropped to 63.4 percent from 64.7 percent in the year prior.
With the rising rent, more middle class families are feeling the impact.
“Rents have skyrocketed so much and incomes haven’t kept pace, so we have an affordability crisis in some of our major metropolitan areas for the middle housing market,” said Kenneth Rosen. Rosen is chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.
Young professionals are also feeling the increase as the share of renters aged 25 to 34 who are considered cost-burdened individuals increased from 40 percent to 46 percent from 2003 to 2013, stated a report by Harvard University’s Joint Center for Housing Studies.
U.S. government data shows that the consumer index for rent of a primary residence was up 3.5 percent in June compared to the past year. However the average hourly earnings were only up two percent during the same period.
MPF Research, a company that tracks occupancy and rental rates found second-quarter rents rose by 5.2 percent from the previous year – a 15-year high. Oakland saw the largest increase of 11.8 percent.
While the rent increase is the highest in the West, more cities located in the middle of the U.S. are feeling the burden of higher prices. Nashville’s rental rates are up 5.1 percent, outpacing income increases. The city has seen new units added to the market, but most consist of luxury apartments, too costly for the average renter. The city recently passed a bill to allocate land for more affordable housing.
The Wall Street Journal spoke with Shantay Walker, a single mother of two juggling three jobs and still worried about making rent.
“Every time I move, I move to a similar place, but they’re all more expensive,” she said. “The thing that scares me is the food part. Sometimes I don’t have money left for food,” Walker told WSJ.
Are you experiencing an increase in your city?