Imagine, if you will, that you only had to pay the recommended maximum of 30% of your income on rent. For a family earning $100,000, that would be $2,500 a month. Not exactly chump change, to be sure — but still not enough to afford even a median-priced two-bedroom apartment in cities like New York, San Francisco, Washington, Boston, or Los Angeles (places where a six-figure salary doesn’t stretch like it used to).
But for a moment, let’s indulge ourselves in that fantasy: What if people only paid what they could afford in rent?
No, we’re not talking about pay-what-you-want restaurants, like those Paneras. But what if people in the 100 biggest American cities paid only 30% of their income in rent — in other words, what most economists consider the highest level of rent people can afford without risking financial hardship?
In that scenario, the average renter would have an extra $6,200 to spend or save each year, according to an analysis by the National Equity Atlas. Collectively, that’s $124 billion that could fuel local economies when spent on groceries, childcare, transportation, medical care, and education — things that many households are forced to skimp on to make rent.
In some areas, of course, that figure is even higher. Renters in the nation’s capital would save $8,600, while renters in El Paso, Texas, would save about half that. In either case, renters all over the country are increasingly stretching themselves financially to enrich their landlords.
Meanwhile, homeownership is near a 50-year low and the number of renters has been rising since the Great Recession. That’s not necessarily a bad thing in and of itself — renting can allow for more mobility to pursue better work opportunities, for example. But as home values and rents have both skyrocketed in recent years, homeowners have amassed trillions in wealth while renters have seen their housing costs spiral out of control with little to show for it. And the brunt of this burden falls largely upon minorities, as CityLab’s Tanvi Misra explains:
Renters of all ages and races are being pinched to keep a roof over their heads. But the affordability crisis is, at its core, an equity issue. Homeownership—the primary way to build wealth in America—has always been set up to favor the white and the rich. Then the recession hit, dealing extra blows to people of color. So, it’s not a coincidence that the black homeownership rate has seen the steepest decline, plummeting to 1994 levels; simultaneously, minorities have made up the bulk of the increase in renter household numbers in the last two decades.
So how can we get closer to this fantasy land where rent “only” devours 30% of your income? Housing experts tend to agree there’s just not enough new construction underway — both for home buyers and for renters. Low inventory is driving up the cost of homes, which keeps more people renting, competing for a scant supply of affordable apartments. The National Equity Atlas also advocates for more community control over housing — such as land trusts, cooperatives, and public or nonprofit solutions for affordable homes — and full funding for the Department of Housing and Urban Development.