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Rental affordability is as bad as it's ever been across the United States, in part because there are not enough new, affordable homes to meet demand, new research suggests. Overall, renters can expect to spend 30.1% of their income on rent, while home buyers can expect to spend about 15.3% of their monthly income on a mortgage payment, according to a study by real estate analyst Zillow. It also found that affordability is worst in fast growing cities that have fallen behind in building homes to keep up with population growth. The firm’s latest rental index is up 3.4% year on year to $1,355 per month while its property price index is up 4.9% to £178,700. Affordability is best in places that either have slow population growth such as Detroit or have met new growth by building new housing units. Chicago, for example, permitted 906 new housing units in 2012 and 2013 for every 1,000 new residents between 2013 and 2014. The index report says that in Chicago renters can expect to spend about 31% of their income on rent, while homebuyers there can expect to put 13.9% of their income toward house payments. It suggests that it is easy to see how San Francisco has become one of the country's least affordable housing markets. Zillow's analysis showed that for every 1,000 new residents, there were just 193 new housing units permitted. Residents of the San Francisco metro can expect to spend 44% of their income on rent, or 39.2% on a monthly mortgage payment. The short supply is no secret to policy makers. The mayor of San Francisco, for example, has pledged to add 30,000 housing units by 2020 and a Boston city report made a similar recommendation to meet demand with 53,000 new housing units by 203o. ‘As the economy continues to improve, more Americans are slowly moving off of their buddies' couches and out of their parents' basements into homes of their own, first likely as renters and then eventually as home buyers,’ said Zillow chief economist Stan Humphries. ‘Unfortunately, the supply of affordable homes, especially affordable rentals, is insufficient in many areas to meet this growing demand. As a result, the competition for those homes that are available can often be fierce, driving up prices and contributing to worsening affordability,’ he explained. ‘More construction will help ease the crunch, and getting a mortgage is also getting easier, which will help more current renters transition to home ownership and further ease rental inventory shortages. But these fixes won't happen overnight,’ he added. Since 2000, rents have grown at roughly twice the pace of incomes. Partially as a result, the percentage of Americans citing cheaper housing as a reason they moved to a different home has almost doubled since then, from 5.6% to 9.6% currently, according to the US Census Bureau. Over the past several years, renting, historically a budget minded choice, has become increasingly less affordable. Meanwhile, recovering home prices, along with historically… Continue reading →
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