The Financial Sacrifice of Renters

There is no doubt that apartment rents are continuing to increase across the United States. According to Yardi Matrix’s “Multifamily National Report” for October 2019, year-over-year rent nationally remained at 3.2%, while the average rent per unit stood at $1,476. According to a Zillow survey, one-quarter of renters indicted that making the rent payments ranges from difficult to very difficult. Furthermore, to make ends meet, two-thirds of those renters need to make at least one financial sacrifice to meet the monthly rent, while half wouldn’t be able to afford an unexpected $1,000 expense, according to the 2019 Zillow Group Consumer Housing Trends Report.

The U.S. median rent consumes 27.8% of median income — this is nearing the 30% tipping point above which rent is considered unaffordable, and the 32% tipping point above which communities can expect a more rapid decrease in homelessness. Because of this, renters are making financial sacrifices to be able to make their monthly payments. For example, in the western United States, 13% of renters are more likely to either postpone or cancel health care services.

The survey also pointed out that younger renters are more likely to report a financial sacrifice to afford the rent — 75% of Gen Z renters report doing so, as do 69% of millennial renters. These are higher than 60% of Gen X and 53% of baby boomer and silent generation renters. Younger renters are also more likely to take an extra job to make their rental payments. Financial sacrifices when it comes to making the rent includes reducing spending on entertainment, technology or communication services, reducing or eliminating savings toward a home down payment, and reducing or eliminating savings for retirement.

“Renting a home in the U.S. is a tale of two renters,” said Zillow Economist Kathryn Coursolle. “Renting provides an ideal lifestyle for many who value the freedom to move more easily as life changes, and want to be free from the burden of maintenance responsibilities.”

She went on to say that the other group considers renting as a temporary situation, the path to homeownership. However, “amid the high home price growth of the past decade or so, saving for a down payment is a struggle for many renters that are making real sacrifices just to make rent each month, and in some cases are one minor setback away from falling behind,” Coursolle said.