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No End in Sight: Rising Rents Are Slamming the Middle Class

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Somerville, Massachusetts

First it was the Irish, then Portuguese, then Brazilians. For more than 150 years, Somerville, Massachusetts absorbed wave after wave of immigrants. Today, hipster professionals are pouring into this city next door to Boston.

Somerville rents have shot up as much as 50 percent in 15 years, and a two-bedroom apartment for under $2,000 in a shabby chic neighborhood is a rare find.

A similar trend is playing out all over the country – from Boston and Miami to Los Angeles and Seattle – and it’s squeezing working- and middle-class families the most, according to the Joint Center for Housing Studies at Harvard University.

Although low-income households are by far the most burdened by their housing costs, “the more prominent story is that we’re starting to see, in middle incomes, a much higher incidence of being cost burdened,” said Jonathan Spader, a senior research associate at the Center.

Nationwide, the share of renter households earning between $30,000 and $44,999 who are either “moderately” or “severely” burdened by housing costs has increased sharply, from 37 percent in 2001 to more than 48 percent in 2014, the Center found.
 

The share of burdened households with earnings in the $45,000-$74,999 range increased from about 12 percent of these renters to more than 21 percent. A disproportionate share of them is either under age 25 or over 65.

The Center defines a moderate burden as having to spend anywhere from 30 percent to half of household members’ combined earnings on housing costs – severely burdened households spend more than half.

The share of severely burdened households, though relatively small, has also doubled since 2001 – to 10 percent of households in the $30,000-$44,999 income range and 2.4 percent in the $45,000-$74,999 range.

What’s driving this trend? One reason is that middle incomes haven’t kept up with rent increases, especially in metropolitan areas. And rents are being pushed up by growing demand: there are 9 million more renters nationwide than a decade ago, bringing renter households to their highest level since the mid-1960s, according to the Center.

Rising demand was also fueled by the foreclosure crisis, which threw owners out of their homes and forced them to rent, and by tightening credit, which made it more difficult to be approved for a mortgage, Spader said. Yet new rental housing units aren’t keeping up with rising demand.

And there’s no sign the pressure on rental properties will be relieved anytime soon. The large Millennial generation born between 1985 and 2004 will continue to move out of their parents’ homes and into their own apartments.

“There’s more to come,” Spader said.

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