Flat Wages, Rising Rents Put Home Ownership Out Of Reach, Especially For Families Of Color
Since the recession of 2008, and the housing market crash, fewer Americans are able to purchase a home. And a new report from The Pew Charitable Trusts finds that since then, many families have become "rent burdened" and struggle to pay the bills.
Erin Currier, director of Pew’s financial security and mobility project, defines "rent burdened" as anyone who's spending 30 percent or more of his or her household gross income on rent alone. Severely rent burdened means half or more of someone's income goes toward rent.
In our conversation about the recent report, Currier says families of color are disproportionately experiencing this burden.
On the scope of rent burden
Rent-burdened households are financially insecure in other ways. Nearly two-thirds have less than $400 held in a bank account, and the typical rent-burdened household has less than $10 in savings — compare that to the typical homeowner who has $7,000 in savings. Our research shows that households that were rent burdened for at least a year were less likely to transition to home ownership than those that never experienced being rent burdened.
On flat wages and 'financial shocks'
We actually did this report because a few years ago we analyzed expenditures more broadly and we could just see that over time households were spending more and more in areas that we consider to be core needs: housing, transportation and food.
If you look at what creates financial security, what allows families to thrive not just in the short term but also in the long term, the data are very clear that a key element of that is being able to pay all their bills and have a little bit of money left over to be able to weather financial shocks — things that they have to spend money on that they weren't prepared to spend money on.
If you continue to have costs of housing, transportation or health care rise and rise and rise and not have increases in wages, inevitably, families are just going to be more vulnerable.
On families of color being more rent burdened
The gap is widening. In 2015, 46 percent of African-American-led renter households were rent burdened, compared with about a third of white households.
But what's really powerful in this research is that between 2001 and 2015, the gap between the share of white and African-American households experiencing severe rent burden (families paying more than half of their income towards rent) grew by 66 percent. This racial wealth gap, racial mobility gap, racial gap in financial security, this is something that our researchers have been seeing over and over and over again, and it's been widely reported in very good research by other organizations as well.
In the particular case of rent burden, we note in the report that on average African-American-led households earn less money than white households do. They also pay on average higher rent than white households do. And so they're hit from both sides and that is definitely contributing to this gap between whites and African-Americans in terms of who is severely rent burdened.
Interview responses have been lightly edited for clarity and length.