As home prices have shot up, so has the cost of renting. With a serious housing shortage and lack of affordable options battering many major North American cities, renters are getting creative with their finances to manage costs.
A new report released by Zillow today highlights the sacrifices American renters are making in order to meet their next monthly rental payment. A staggering 66 percent of renters claimed to have made at least one sacrifice to afford their rent, ranging from reducing spending allowances to cutting back on retirement or college savings.
The conventional wisdom dictates that one should only spend 30 percent or less of their income on housing costs. The 2019 Zillow Consumer Housing Trends Report found that the average American renter is coming dangerously close to exceeding this limit — the median rent is now taking up 27.8 percent of the US median income. To put things in perspective, the report points out that communities where housing costs eat up 32 percent of a person’s income can expect an accelerated increase in homelessness.
Unaffordable rent leaves many severely cash strapped. Just 51 percent of all renters say that they could accommodate a $1,000 expense. Only 38 percent of Boomer and Silent Generation renters could shoulder the same cost. If you’re a homeowner or a young renter, these expenses are more manageable — 80 percent of homeowners and 60 percent of Gen Z renters could afford a $1,000 bill. Considering that the household income among homeowners is higher than those who rent — $75,000 a year compared to $37,500 — surprise costs are easier to absorb.
Across the generations, younger renters are the most likely to cut costs for affordability’s sake. Seventy-five percent of Gen Z renters and 69 percent of Millennials reported having made at least one financial sacrifice to support their rent, whether it be no more Netflix, or saying sayonara to Starbucks. Picking up more work, either an increase in hours or an additional job, was among the most popular strategies for managing costs for the Tik Tok and avocado toast-loving renters.
Yet, only 18 percent of Gen Z’s said that affording their rent is difficult or very difficult, compared to 28 percent of their predecessors. The Bank of Mom and Dad is likely to blame for this one, with 20 percent of Gen Z’s reportedly receiving help for rent from their parents or other family members.
Older renters claim that they are less likely to make financial cutbacks — a slightly smaller portion than their younger counterparts, 60 percent of Gen X and 53 percent of Baby Boomer renters said that they needed to make a rental-related financial sacrifice.
The responsibility of caring for a child drastically altered the rate with which renters needed to make a financial change. Compared to 59 percent of their childless peers, 70 percent of renting parents reported making sacrifices — 28 percent took on extra work, 23 percent reduced spending on technology services and monthly payments, and 13 percent limited their savings towards a downpayment.
Whether you’re on team OK, Boomer or team Gen Why, no one can catch a break on the field of hella-expensive rentals.