The Ten Cities Where People Cannot Afford To Rent

Some housing economists believe that there is a sea change taking place in home ownership in the US. Many of the people who bought homes during the boom years of 2000-2006  have since lost them.  Millions of mortgages are underwater, eroding the financial security that owning a home used to provide. Americans may be, for the first time in memory, more interested in renting a home than owning one.

Home ownership was supposed to be a near-certain path to a comfortable retirement. A couple could own a house bought thirty years before they retired and sell it at a large profit to fund their expenses after they turned 65. The fall in the value of the housing market has turned that dream into a nightmare for many people. As many people retire, they find their mortgages are underwater, or worth more than the value of their homes.

The depression in home prices and fear about an ongoing fall in housing prices has driven people to the rental market. The appeal is understandable. Landlords bear the burdens of repair and upkeep. Renters need only worry about their rent, utilities and living expenses.

The trouble with renting is not very different from home ownership. Many people cannot afford to buy a house. And a great many people cannot afford to rent, either. The Harvard University Joint Center for Housing Studies published a paper on April 27, 2011 concerning home rental trends. The data shows that in many US cities, a large percentage of people pay 50% or more of their household income a month for rent. It is not unusual for a quarter of the people in a city to pay this high a portion of their income for rent. The burden is greater in many cases when relatively high rent prices are coupled with modest income and high unemployment. The Harvard study calls people who pay more than 50% of their household incomes on rent severely “cost-burdened” renters. Meg Nipson, research assistant at Harvard’s Joint Center for Housing Studies, told 24/7 Wall St. there is a “pretty huge overlap between low income and cost burden.”

As more people seek cheap housing, it will take time to see if that increased demand will move rents higher in some parts of the country where demand for affordable housing is high. People in cities like Detroit need a roof, but many cannot afford either to buy or rent a home. The economics become twisted – high demand for rentals, and large numbers of low income renters.

The sad conclusion of the move to rentals is not in the Harvard study. The wealthy will be able to rent high- end apartments and homes. But where will the inventory for the lower middle class and poor come from? There are not any good statistics about the trend yet, but it is not hard to make an educated guess. Foreclosures and home abandonment have left record amounts of housing unoccupied. Many low income renters will almost certainly find that over time they will be sheltered in homes once owned by people who could no longer afford them.

These are the ten cities with the highest percent of households that pay 50% or more of their income to rent.

10. Stockton, CA
> Cost-Burdened Renter Households 2009: 30.5%
> Cost-Burdened Renter Households 2000: 22.7%
> Median Household Income 2009: $45,730

Stockton has faced many hardships  since the recession.  In 2008, the city had the worst foreclosure rate in the country.  Stockton is still suffering economically.  It currently has an unemployment rate of 17.6%, the ninth-highest rate among all cities in the country.  Now 30.5% of it’s renter households, which make up 47% of all occupied households, are cost burdened.

9. Toledo, OH
> Cost-Burdened Renter Households 2009: 30.8%
> Cost-Burdened Renter Households 2000: 20.2%
> Median Household Income 2009: $32,325

The rising rate of cash-strapped renters in Toledo is most likely the result of the growing class of the working poor.  Toledo has generally low rent rates.  The median rent amount for the city is $466 per month, the lowest amount on this list.  Nonetheless, many people are unable to find affordable housing. At last report, the jobless rate in the Toledo metropolitan area was 10.9%, compared to the nationwide unemployment rate of 8.8%.  The jobless rate in the city of Toledo is 15.2%.

8. Orlando, FL
> Cost-Burdened Renter Households 2009: 30.9%
> Cost-Burdened Renter Households 2000: 19.3%
> Median Household Income 2009: $39,881

Orlando was hurt extremely hard by the recession because of its dependence on the tourism industry.  Unemployment in the city peaked at 12.5% last year.  The area has since improved economically.  Orlando was recently named by Kiplinger as one of the top eleven cities which will make the biggest comeback this year from their recession-induced low points.  Due to increased tourism and a growing health care industry, employment in the city is expected to increase by 3% this year alone.

7. Memphis, TN
> Cost-Burdened Renter Households 2009: 31.6%
> Cost-Burdened Renter Households 2000: 21.8%
> Median Household Income 2009: $34,203

Memphis is one of the few metros where it is better to rent than to buy, according to real estate website Trulia.  That rental prices are reasonable, however, implies that it is residents’ low income levels which keep renters burdened by housing costs.  Unemployment in the area is currently 9.9%.  According to Memphis’ Community Alliance for the Homeless, the number of  homeless people has increased 20% from one year ago.  The average annual income for a household in Memphis is approximately $4,000 less than the national average, according to data from the Bureau of Labor Statistics.

6. Akron, OH
> Cost-Burdened Renter Households 2009: 31.8%
> Cost-Burdened Renter Households 2000: 19.4%
> Median Household Income 2009: $32,892

Rental occupancy in the Cleveland-Akron area is at the highest it’s been in more than a decade.  As a result, rents are on the rise.  Things will most likely get worse for low-income renters. Ohio is spending $1.4 billion on economic development this year.  Florida, by contrast, is spending $11 million.  As more people move to the Akron area, inexpensive housing will further decrease.

5. New Orleans, LA
> Cost-Burdened Renter Households 2009: 31.8%
> Cost-Burdened Renter Households 2000: 24.5%
> Median Household Income 2009: $36,468

Louisiana has the fourth-greatest amount of income inequality in the country.  The bottom 25% of earners make only 4% of the state’s income, while the top 5% make 29% of the income.  In New Orleans, this is compounded by a lack of affordable housing for low-income residents since Hurricane Katrina struck in 2005.  The Housing Authority of New Orleans is still receiving funds from FEMA to aid in the construction of public housing units.

4. New Haven, CT
> Cost-Burdened Renter Households 2009: 32.7%
> Cost-Burdened Renter Households 2000: 21.6%
> Median Household Income 2009: $38,279

New Haven residents pay the highest median rent amount among all of the cities on this list, $872.  The median household income in New Haven county is $68,000, much higher than the national average of $50,000.  New Haven also has an extremely high poverty rate, with 26.7% of people living in poverty.  The national average is 14%.  This disparity causes rent prices to increase, despite the widespread need for low-income housing.

Also Read: Gasoline About To Hit All-Time High Of $4.11

3. Detroit, MI
> Cost-Burdened Renter Households 2009: 32.8%
> Cost-Burdened Renter Households 2000: 20%
> Median Household Income 2009: $26,098

Housing costs are low in Detroit, but renter incomes are even lower.  The city was hit incredibly hard during the recession and unemployment increased to just under 30%.  As a result, the area underwent a 39% increase in renters who are cost burdened from 2000, the greatest increase among all cities on this list.  Despite improvements, the city is still economically depressed, hence the high percentage of renters with housing cost burdens.

2. McAllen, TX
> Cost-Burdened Renter Households 2009: 33.1%
> Cost-Burdened Renter Households 2000: 21.6%
> Median Household Income 2009: $34,984

McAllen, Texas, is located at the southern-most tip of the state along the border with Mexico, and is by many standards the poorest region in the United States. The poverty rate in 2009 was 28.7%, nearly 60% greater than the state average of 17.2%. Fifty-eight percent of those who rent in McAllen are below the poverty line, compared to the Texas average of just over 30%. Nearly 30% of the city’s residents receive food stamps, the highest rate in the country among all metropolitan areas.

1. Miami, FL
> Cost-Burdened Renter Households 2009: 34.2%
> Cost-Burdened Renter Households 2000: 26%
> Median Household Income 2009: $28,999

Miami has the greatest percentage of cost-burdened renter households in the nation.  Worse still, it has the highest amount of rented households relative to its total housing units among cities on this list — 65%.  The Miami-Dade area currently has an unemployment rate of 12.9 percent, however this number is expected to decrease as Florida’s economy gets better.  Burdened renters may also get a break as housing prices fall.  As of last month, home pricing had dropped 6.2 percent from 2010.

-Douglas A. McIntyre & Charles B. Stockdale