“The Rent’s Too Damn High” Is No Lie

Posted on Posted in Real Estate

By J Clinton Hill, Capital Markets Strategist @ Hillbent.com

for-rentRental inflation has been a plague for many Americans since the 2008 recession. According to the National Low Income Housing Coalition, an American renting a 2-bedroom unit in 2016 would need to earn an average $20.30 per hour based upon a 40-hour workweek. This figure is known as the national average “housing wage”.  However, a person earning the rate of the Federal minimum wage @ $7.25 per hour would need to work 90 hours a week to afford a one-bedroom unit or 112 hours to afford a two-bedroom unit.

With a positive birth rate, in addition to millennials representing the largest demographic population in America, demand for rental apartments will only get stronger. Typically, 30% of income is budgeted for housing shelter, but for most renters today it can be even twice this percentage. The bottom line is that rent is simply too damn high as in many states the average renter wage is far below the average housing wage.

 

 

rental-cola-aug-2016
Click to enlarge

 

 

Related Securities (This list is not intended to be comprehensive, but instead reflects some of the major holdings of ETF residential income REITs.)

  • iShares Residential Real Estate ETF (REZ)
  • Essex Property Inc REIT (ESS)
  • Avalon Bay Community Inc REIT (AVB)
  • Mid American Apartment Communities Inc REIT (MAA)
  • Equity Residential REIT (EQR)

 

Reference Sources

Leave a Reply

Your email address will not be published. Required fields are marked *