Why the Rental Picture Looks Grim

Rental costs are escalating and that's unlikely to change anytime soon, according to a new report.

About 11 percent more households are expected to pay more than half their incomes in rent in 2025, shows a new report from Harvard University’s Joint Center for Housing Studies and Enterprise Community Partners. Households are considered “severely cost-burdened” when they devote more than 50 percent of their incomes on rent.

In several scenarios painted in the report, the authors say the number of burdened renter households could increase to more than 13 million in 2025 – from an estimated 11.8 million this year. What’s more, if rents continue to grow faster than incomes – a trend for the past 15 years – the number of severely burdened households could climb by up to 25 percent.

Read more: Why Renters May Be in Trouble

In 2013, one in four renters – or 11.2 million households – devoted more than half of their incomes to rent, according to JCHS. That is up from 3 million since 2000 alone.

The report says that renters are expected to grow too due to demographic changes and the struggle to afford housing. For one, the increase in the Hispanic population will contribute to a growth, as Hispanics tend to be disproportionately renters and are more likely to pay a large share of their incomes in rent, according to the study. Millennials are also expected to continue renting in larger numbers than previous generations due to recession-after effects that had left them unemployed or underemployed for crucial years of their careers.

“The bottom line is that we are not likely to see demographic forces help, but more likely hinder the issue of affordability,” Chris Herbert, managing director of the Joint Center for Housing Studies, told The Wall Street Journal.

DAILY REAL ESTATE NEWS  WEDNESDAY, SEPTEMBER 23, 2015