Incomes are not keeping pace with rents.
More earnings are needed for rent than in years past—now 29.1 percent of the median monthly income, versus the 25.8 percent needed prior to the recession, according to an analysis recently released by Zillow. The difference equals $1,957 more than if the share had stayed the same.
Homeowners, however, are not allocating more of their income to a mortgage, the analysis shows. A mortgage accounts for 15.4 percent of the median monthly income now, versus 21 percent prior to the recession—$3,289 in savings.
The discrepancy has implications for renters, says Dr. Svenja Gudell, chief economist at Zillow.
“In most markets, current renters are at a disadvantage compared to years past because paying the rent takes up a much larger share of their income than it did before,” Gudell says. “For many people, that can mean less cash to put toward paying off student debt, building an emergency fund, or saving for retirement. For those hoping to buy a home, it could be a significant part of their down payment. For parents, it could mean additional childcare or a family vacation. This is another example of how much worse rent affordability has gotten.”