US households are now 'rent-burdened' for the first time ever, blowing 30% of their income on rent — these 3 states are the most squeezed. (Plus tips on how to handle the distress.)Many Americans will be familiar with the 30% rule, which dictates that housing costs should never eat up more than 30% of your household income. But as it turns out, that old rule of thumb has become untenable for apartment dwellers these days.
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For the first time ever, American renters are spending that astronomical percentage — or more. Moody’s Analytics calls it a “rent burden.” Squeezed renters may prefer to call it the equivalent, financially speaking, of living in a walk-in closet.
Meanwhile, skyrocketing mortgage rates have prevented many Americans from making the leap from renter to homeowner. That in turn has meant a rental unit shortage, moving landlords to raise prices. And in some states, that’s left renters paying as much as a third of their salary on rent alone.
States of desperationIn Massachusetts, Florida and New York, Americans spend 32.9%, 32.6% and 31.2% of their income respectively on rent. Assuming you make $71,456 (the mean American income as of 2022), if you live in the Sunshine State, you’re actually sitting under a dark cloud: paying close to $6,000 a month in rent, based on those income and 32.9% figures.
Florida also saw a substantial jump in rental costs: 4.2% over the last three years, according to Moody’s. Blame it in large part on supply and demand, the biggest issues at present for renters and homeowners.
With fewer homes available, rent keeps climbing; as interest rates rise, homes become less affordable — even as in most parts of the nation, the seller’s market continues to dominate.
What’s more, homeowners spooked by the proposition of buying a new home at high interest rates have put the kibosh on moving.
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What can Americans do?For many renters, staying put may be the best option. If you have a good relationship with your landlord, you may be able to forestall an increase.
One effective way involves bartering, where you agree to take care of minor maintenance needs and thus avoid expensive handyman calls for the building owner.
But if such options aren’t possible and you’re spending more than 30%, consider other accommodations that come at a cheaper price — even if temporarily. Recent college graduates may loathe the idea of moving back in with their folks. But aside from buying some breathing room, they might just be able to save enough money to cover housing costs once they move out again.
You could also consider:
Subletting what you have: If you rent in a big city, you could have two options to create cash right away: sublet your storage and parking. If you rent out what you have, even at a slight loss, it’ll help cut your overall housing figure. Why stop there? Look into mobile apps to help you rent out other items. Consider services like Turo for your car and Yoodlize for general items.
Leveraging your rewards credit cards: Assuming you can pay off your monthly spending in full, use your credit card as often as possible to earn rewards points that accrue just about any premium from air travel to groceries — or even net cash back.
Paying off interest-bearing debt: After you use that credit card a bunch, make sure to pay down your balance. Interest paid on credit cards is money thrown away. Period. And if the rates are exorbitant — say in the 20% range — making the minimum payment will amount to bailing water from a leaky boat.
Putting it all together: Don’t give upHigh rents are discouraging — if you feel that you’re working just to afford a place to live, and that your home owning dreams are on hold, you’re not alone. What to do?
Before financial freedom begins, a wealthy mindset must come first. Worrying about the things you can’t control — including a landlord’s decision to make more money from tenants — isn’t going to get you anywhere.
When you concentrate on what you can control — by budgeting, creating passive income or negotiating price breaks — you’ll be on the road to beating the percentages, and finding the one thing money can’t buy, or rent for that matter: hope.
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