Many households around the U.S. are spending a significant portion of their income on rent — sometimes as much as half. While renters are feeling the squeeze from housing costs in big cities around the country, the problem is most pronounced in Miami, San Diego and Los Angeles, according to a study of the top 20 most rent burdened metropolitan statistical areas (MSAs) by Freddie Mac.
The mortgage giant examined several affordability studies and how each determine whether a metropolitan area has a high rent problem.
While this is certainly the case, the issue isn't only confined to people living in big cities, according to Tanya Eastwood, head of Greystone Affordable Development.
“What this report reveals is that there are many, sometimes surprising large cities struggling with an affordability crisis," Eastwood said. "The unspoken reality is that it is a pervasive, national issue impacting both highly populated and rural areas, where poverty rates are substantially higher than in urban areas."
Affordability Supply Not Meeting Demand
Rounding out the top 10 most rent burdened MSAs on Freddie's list were New York City; Orlando, Fla.; New Orleans; Tampa, Fla.; San Jose, Calif.; Riverside, Calif.; and Virginia Beach, Va.
However, neither New York City nor San Francisco, which ranked 13th, ended up in the top three, despite being perceived as the most expensive and cost burdened markets. This is because those locations enjoy higher income levels, the study found.
Other "high-cost" East Coast cities like Boston and Washington, D.C., didn't even make the list, even though many renters are paying more than 30 percent of their incomes towards rent, because of higher incomes overall.
"A limiting factor of the reports is the assumption that anything above 30 percent of income being allocated to rent is considered rent burdened," per the report. "While this is generally considered a good rule of thumb, a single renter in a high-income area paying 40 percent of their income toward rent may still be much less rent burdened than a renter supporting a family in a lower income area who is paying 30 percent toward rent."
Whatever the method used to detect a rent burdened region, it's clear that the supply of affordable units "just hasn't kept pace with demand in many metros, and that's pushing affordable rents out of reach for millions of American families," according to Steve Guggenmos, vice president of Freddie Mac Multifamily Research and Modeling.
Rural Areas Face Their Own Challenges
Meanwhile, another crisis is emerging in rural areas, where lower incomes often aren't sufficient to meet rising rents.
A recent report from the Pew Charitable Trust's Stateline noted that nearly one in four of the country's most rural counties (fewer than 10,000 residents) has seen a significant uptick in the number of households severely burdened by housing costs.
“Losses of high-paying jobs have hit some rural regions, such as a cluster of coal-dependent counties in Kentucky, Tennessee and Virginia, especially hard," Pew noted.
In rural places experiencing an economic revival, such as Irion County, Texas, where new wind farm workers need housing, the supply-and-demand dynamic has driven up rental prices.
Federal incentives geared toward affordable units have slowly faded, leading to higher rents. More than 2,000 rental properties left the federal program, mostly in the Midwest, between 2006 and 2016, according to Pew.
As Eastwood notes, federal tax incentive programs are critical to addressing this issue because the country is rapidly falling behind in being able to meet the demand for affordable housing — regardless of location.
“We need creation, expansion and immediate attention to the outdated and expiring programs currently dedicated to affordable housing in the U.S.," Eastwood said.