Fed Rate Hike Raises Mortgage Rates
Tenants Giving Up on Buying Homes Flock to Apartments, Driving Up Monthly Rent
The burden of housing rental costs in the United States is increasing, with residents in New York having to spend 70% of their income on monthly rent.
According to a report released by Moody's Analytics on the 21st (local time), the average rent-to-income ratio in the fourth quarter of last year increased by 1.5% compared to the previous year, reaching 30% for the first time in over 20 years since the company began compiling statistics.
The U.S. federal government defines households spending more than 30% of their income on rent as experiencing 'rent burden,' and now the average renter in the U.S. falls into this category.
The political media outlet The Hill evaluated, "While it has long been common in many U.S. cities to spend more than 30% of income on rent, surpassing 30% nationwide means many people have reached a point where they can no longer afford housing costs."
The housing cost issue has become so prominent in the U.S. recently because repeated interest rate hikes by the Federal Reserve (Fed) have increased mortgage rates, causing many households to give up on purchasing homes. As renters who gave up on buying homes flocked to apartments, apartment rents surged.
Fundamentally, this is rooted in the phenomenon since the 2008 financial crisis where housing supply has not kept up with demand. As a result, home purchase prices and rents have steadily increased. Meanwhile, incomes have not risen as quickly as rents.
Especially among low- and middle-income households, the rent-to-income ratio exceeded 40%. By state, Massachusetts (32.9%), Florida (32.6%), and New York (31.2%) had the highest housing rental burdens.
The city with the highest rent-to-income ratio was New York, where residents spent 68.5% of their income on rent. Following were Miami (41.6%), Fort Lauderdale (36.7%), Los Angeles (35.6%), and Palm Beach (33.6%).
As the housing cost problem worsens, the Biden administration is also preparing countermeasures. Last month, the Biden administration announced the 'Tenant Bill of Rights Blueprint,' which includes principles such as tenant protection and strengthening rental market oversight, and the Treasury Department provided $690 million to assist financially struggling renters.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
