“The rent is too damn high” is more than a political slogan. It reflects the harsh reality of increasingly unaffordable housing in America today. Ever since the economic crisis of 2008, American has been in the midst of a “great housing reset”—a shift from home-ownership to renting. But it’s not just that home-ownership that’s become increasingly unaffordable. Renting has too. Between 2001 and 2014, the number of renters who spend more than half of their income on rent grew by more than 50 percent, from 7.5 million to 11.4 million renters.
A new study by Denise DiPasquale and Michael Murray published in the Journal of Regional Science provides some answers for this growing rent squeeze. The study uses data from the U.S. Census and especially the Consumer Expenditure Survey to chart the share of income devoted to rent and other expenses over the past 80 or so years.
The study identifies a key paradox that lies behind America’s growing rental housing affordability crisis. For the four decades between 1930 and 1970, the long era of rising home ownership, the incomes of renters rose while the cost of renting declined. But after 1970 something puzzling and troubling happened: rents have increased while the incomes of renters have fallen. This has meant that renters have had to scrimp on other purchases, from necessities such as food, clothing, and schooling to amenities such as eating out and buying new tech gadgets. The rising share of income devoted to rent may be an important contributor to what economists dub secular stagnation, the inability of our economy to generate the robust demand required to sustain economic growth.
[For more of this story, written by Richard Florida, go to http://www.citylab.com/housing...c-stagnation/506258/]
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