Photo: Robert Clark
Stagnant wage growth and rising rents mean some Americans will have to put aside more of their income towards housing costs than ever before.
And that could cost some New York City renters as much as an additional $10,000 in housing costs per year, according to a report released earlier this week by the listing site Zillow.
The share of income required for housing in NYC was 26.2 percent during the pre-bubble era, between the years 1985 and 2000, compared to 39.3 percent today. That means today NYC renters will need an additional $9,543 annually for housing costs.
During the pre-bubble years, the median national rent required 25.8 percent of the median income. By contrast, today the median national rent requires 29.1 percent of the median income, or an additional $1,957 per year.
Today renters in 34 of the country’s 35 largest housing markets now have to set aside a larger share of their income for rent compared to the pre-bubble years — Pittsburgh, PA was the only market where the percentage decreased, saving renters $3,392 annually.
“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,” says Zillow Chief Economist Dr. Svenja Gudell in the report.
Having less cash on hand means renters have less money to use towards getting out of debt, saving for a rainy day or putting towards their eventual retirement.
“And, for those hoping to buy a home, it could be a significant part of their down payment,” says Gudell.
Meantime, the typical homeowner in 2017 spends just 15.4 percent of their annual income on housing, but spent 21 percent during the pre-bubble years. Homeowners are spending on average $3,300 less per year today on the typical mortgage compared to the pre-bubble years.
Although younger generations want to buy homes and stop renting, but with home prices expected to rise in 2018, first-time buyers will need to save an additional $105 monthly toward their down payment to cover the growing prices.
Click here to read the entire report.