America’s rental crisis

December 10, 2013

Earlier today, a union organizer from Oakland named Max Bell Alper successfully (if briefly) trolled the internet with a stunt showing him shouting at a protestor. The protest was against Google’s buses: they use municipal infrastructure, but don’t giving anything back in return. Alper’s monologue, delivered in character as an obnoxious Google employee, went like this:

I can pay my rent. Can you pay your rent? … Well then, you know what? Why don’t you go to a city where you can afford it? This is a city for the right people. Who can afford it. If you can’t afford it, it’s time for you to leave. I’m sorry, I’m sorry. It’s time for you to leave. If you can’t pay your rent, I’m sorry. Get a better job.

OK, it’s not exactly Tony Award-winning stuff. But the attitude being skewered here — the idea that people who can’t pay their rent deserve no sympathy and should just move out of sight and out of mind — is actually deeply American.

The problem is simple arithmetic, as laid out in a sobering new report from Harvard University:

In 2011, 11.8 million renters with extremely low incomes (less than 30 percent of area median income, or about $19,000 nationally) competed for just 6.9 million rentals affordable at that income cutoff—a shortfall of 4.9 million units. The supply gap worsened substantially in 2001–11 as the number of extremely low-income renters climbed by 3.0 million while the number of affordable rentals was unchanged. Making matters worse, 2.6 million of these affordable rentals were occupied by higher-income households.

When you have 11.8 million households chasing 4.3 million affordable rental units, no amount of moving out of town is going to solve the problem, which is only getting worse, thanks to the way in which inequality is getting worse in America. Here’s the chart, which shows the inexorable rise of rents, even as the median income of renters has declined dramatically since 2000:

The result is the next chart: half of all renters now spend 30% of their income on rent, and a quarter spend more than 50%. This is an unprecedented squeeze on the people who can least afford the shelter they need.

The squeeze hits all non-rent expenses, naturally, including food: households in the lowest expenditure quartile spend $350 per month on food if they’re in affordable housing, but just $200 per month if they’re part of the group with severe rent-cost burdens. That works out to about $6.50 per day — and we’re talking millions of households, here. Overall, there are 21.1 million cost-burdened renters in America, including 83% of people with incomes under $15,000 per year.

In general, renting is a good thing: it improves labor mobility, and avoids forcing cash-strapped households to put an enormous proportion of their net worth into a single unreliable asset. But even as the number of renters has increased in recent years, the proportion of renters receiving any kind of government assistance has steadily declined. The result is that America as a whole is turning into a version of San Francisco — a place where the privileged rent expensive apartments, and not-so-secretly wish that everybody else would just go away. Annie Lowrey’s story today says it all:

“We’ve seen a huge loss of affordable housing stock,” said Jenny Reed, the policy director at the D.C. Fiscal Policy Institute. “We have lost 50 percent of our low-cost units over the past 10 years, and at the same time, the number of high-cost apartments, the ones going for more than $1,500 a month, more than tripled.”…

“Builders always are aiming at that higher end,” said Jed Kolko, the chief economist at Trulia. “And eventually, as those new units age, they trickle down to lower-income borrowers.”

But not now. With demand surging, inventories are shrinking, vacancy rates are falling and rents are rising at the low end.

The government, of course, is part of the problem, rather than part of the solution: sequestration, in particular, has hit housing programs (which weren’t exactly ubiquitous to begin with) very hard indeed. But if the government won’t step in here, the market is going to be no help for the foreseeable future. The economic recovery of the past five years has left millions of Americans behind — Americans who, increasingly, simply can’t afford to make rent any more. Those Americans are never going to be a source of great profits for private-sector developers. But getting them safely housed isn’t just a moral issue. Failure to find them affordable housing will, in the long term, cost us even more.


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