Highlighting the growing imbalance between rising rents and stagnant wages, Harvard University reported Wednesday that the number of cost-burdened renters in the U.S. has reached an all-time high.
Personal finance experts generally recommend budgeting around 30% of monthly income to cover housing costs. But the annual State of the Nation’s Housing Report from Harvard’s Joint Center for Housing Studies suggests that is no longer a realistic threshold for many Americans.
The number of renters dedicating at least half of their income toward housing hit a record high of 11 million people in 2014, according to the study, while 21.3 million renters are spending 30% or more of their paycheck to cover their housing — also a record high.
Cost-burdened renters are those who spend at least 30% of their income on rent.
“When you have to dedicate such a high proportion of your income to rent every month, it forces you to make difficult decisions,” Dan McCue, a senior research associate at the Joint Center, told CNN Money.
After devoting more than half of their incomes to housing, severely cost-burdened households in the bottom expenditure quartile (a proxy for low income) spent 41% less on food and 74% less on healthcare than their counterparts living in housing they could afford, according to the 2014 Consumer Expenditure Survey.
The increase in cost-burdened renters comes amid the biggest surge in new renters in history. According to the report, the number of Americans living in rental units is now around 110 million people, or about 36% of households.
“Rental demand is expected to remain robust over the next decade as the youngest members of the millennial generation reach their 20s and begin to form their own households,” the report said. “Moreover, if home ownership rates for households in their 30s and 40s continue to slide, rental demand will be stronger still.”
The report also noted that without public subsidies, the cost of a typical market-rate rental unit will remain out of reach for the nation’s lowest income households.