1 in 4 renters must use half their earnings to pay their housing costs

Article here.

I have a lot of thoughts and opinions about this.

  1. There should be no stigma for a 20-something or even 30-something to live with his or her parents for the purpose of saving money.

  2. Hiking up the minimum wage a couple of bucks isn’t going to help things that much.

  3. We really need more affordable housing in city centers and other areas where jobs are located. This should be something both conservatives and liberals agree on. How does it benefit families when mom and dad both have 90-minute commutes? Or when families are crammed in tiny apartments with a revolving door of roommates. Also, maybe it’s time for people to be creative by trying intentional communities or co-living.

  4. It is easy to tell renters they should just go on and buy a house already. But there is a reason homeownership is extremely low right now. A lot of renters are renting because they can’t afford houses. And even if they are ready to buy, there are few homes on the market right now…especially affordable ones.

  5. I’ve got a contract on a house right now. It’s a small house in a modest neighborhood, but man am I glad I’ve been saving for as long as I have. It’s a lot more expensive than I originally wanted to spend, which sucks because I will be giving up a lot of the perks I currently enjoy in the neighborhood where I rent. But my rent will be going up a whole lot in a few months. My house payment will be about the same as my increased rent, but at least I’ll be off the escalator before that stops being the case.

  6. Maybe we need to let go of rules like “You should never spend more than 35% on housing”? Maybe that’s a rule from a by-gone era, something our parents/grandparents came up with when housing was more affordable and incomes were higher and homeownership was considered ideal? I don’t think the free market is a natural force that can’t or shouldn’t be modified through public policy, but there also comes a point where people need to free themselves from unrealistic expectations. Maybe there’s nothing fundamentally wrong with paying 50% of your earnings on rent as long as you’ve got a realistic plan for retirement and you’re frugal in other areas.

I never rented and don’t understand why so many people rent who don’t have to. When I was 19 I moved out of my parent’s house and bought a used mobile home. The cost of that was less than renting. When that loan was paid off I used the equity as a down payment on a house which again was cheaper than renting. When I lived in the mobile home my costs were over $100 less than an apartment and I had more space to live in. I could have rented out one of the bedrooms and probably covered the entire cost of the trailer.

What it means is that people starting out in life refrain from cable tv, fancy phones, eating out, and all the other financial pitfalls holding them back. It means establishing good credit early and maintaining it.

But before everybody piles on with “the poor can’t afford it” keep in mind we’re discussing people who are already renting and not those who are on subsidized housing.

That’s fine, but around these parts, single family homes are, at a minimum, 300-350k. Mobile homes come with a $600/mo rental fee for the lot, plus the payment for the unit. Condos are probably 200k plus. Regardless, no at 19 is going to have the down payment, credit history or the income necessary to get a loan. And that’s assuming they don’t have a car, a iPhone, cable, internet. I see rents averaging 1500 - 2000 mo. around here. Even splitting that 3 ways is still a big chunk for a 19 - 20 year old.

I hear people with good jobs in San Francisco have to ride the bus all night long just to have a place to sleep.

Maybe it’s different in the US, but the main reason I never really considered buying when I was in the UK is not that I couldn’t afford the monthly mortgage repayments - it’s that I couldn’t save up enough for the necessary deposit. At the time, banks were asking for buyers to make a deposit of around 10% (I don’t know what they want now) and depending on income, they’d cover the rest - given the price of houses in and around London, where I was working at the time, 10% added up to about a year’s gross salary for me. It’s not an easy amount to save up, especially when half your income disappears on rent each month.

So that’s one possible reason people don’t buy - though, as I say, maybe it’s different in the US. Is there a standard deposit amount you’re supposed to provide?

Did you have to put a downpayment on that mobile home, Magiver?

  • I don’t have to worry about maintenance or repairs on the building, nor yardwork/upkeep/snow clearing. the former is a phone call away, the latter is taken care of as a matter of course.
  • If I need/want to move, at most I have to wait several months (assuming I’m under a lease.) No need to worry about trying to sell a house, and all of the hassle that goes with it.
  • my homeowner’s insurance is much cheaper since I’m only insuring my possessions and not the building and property.

I could easily afford to buy a house. I choose not to.

eta: yeah, and what zweisamkeit said. I don’t need to plunk down $10-20,000 up front before moving into an apartment/condo sub-lease.

Ding ding ding! We have a winner!

I’d love to live in a mobile home. Seriously. Whenever I tell people this, they laugh. And my parents think I’m crazy.

But alas, the closest mobile home park to me is not where I want to live. It’s not in close commuting distance to work, and it’s in an area where crime is extremely high. To find a decent mobile home, I’d have to go out to the suburbs. For me, the conveniences of the city (public transit, walk-friendly neighborhoods) outweigh the cheaper housing costs of suburbia.

But a lot of people get their credit ruined by doing what seems like the responsible thing at the time. Like taking out student loans or buying a house. Or getting married to someone that they are later going to divorce. Should these people have to suffer through sanctimonious lecturing about “poor choices” when–in an alternative reality–their choices would have led to financial success?

If you read the article, you’ll see that we’re talking about both populations. Many people who are on subsidized housing are only on it for a temporary time. Rising rents make it harder for these people to pull themselves up by the bootstraps.

Buying a house is not a smart decision for someone who isn’t sure where he will be working five years from now. I’m gonna guess the majority of renters who are being squeezed by rising rents fall into this category.

It was basically classed as a used car loan. Any money I put down would have been equivalent to a rent deposit.

A lot of current homeowners had help when purchasing their first homes. My eldest sister, who didn’t have shit saved, was able to buy a house because my mother helped with the downpayment. Now my sister is trying to buy a house for her oldest daughter, recognizing how difficult it would be for her to buy property on her modest wages. I have no doubt in my mind that my niece will be bragging about how she’s a homeowner while looking down on her renting friends.

I know a couple of people who put a large inheritance into a downpayment . I’m guessing a lot of people like this then turn around and scold renters for “throwing away money”…forgetting that they had assistance that others may not have. Hell, even having someone who will co-sign a loan for you in the absence of credit history is help that not everyone has.

About the stigma- it may be because I’ve always lived in NYC* , but I’ve never seen a stigma attached to people who live with their parents for a couple of years while they work full time to save money for some purpose (a down payment, a wedding or just to have a nest egg before moving out). To the extent there is a stigma, it gets attached to a different group of people - the ones who can afford their preferred lifestyle only if they stay with their parents and make a nominal contribution to running the household.

And while affordable housing sounds good, you have to plan a whole system around it. Otherwise, you end up with situations where there is a disincentive to move, which cuts down on the supply of apartments which then raises the rents on market rate apartments if the demand hasn’t changed.

  • I literally don’t know anyone who grew up in NYC and stayed here who didn’t continue to live with their parents for some period of time after they started working full time or anyone who left their parents’ home and got their own apartment without a spouse, SO or roommate. And I’m 51, so it’s not something that just started happening.

I don’t understand how this follows. The purpose of such a rule of thumb is to prevent dilemmas like “making their rent or buying groceries,” by ensuring that you don’t have so much of your income taken up by housing costs that you don’t have enough left to meet other needs. The rule presupposes that people have some choice about where to live, and that they want to live in as nice a place as they can afford, and it tries to quantify what “they can afford” is.

Agreed.

For that matter, I don’t think there should be stigma attached to extended family under one roof at any age.

I disagree. For the working poor, and extra $150 or so a month (about what you get with a $1/hour raise) can make a significant difference in their lives. It won’t entirely cure the problem but it certainly helps with the desperation. Raising my current wage, which is above minimum, to the often proposed $15/hour would be an additional $900/month and would reduce my rent costs from 43% of my gross income to 25% of my income.

For that matter, if my wage just went up to $12/hour I could get off food stamps and still eat decently.

At the bottom, even a small increase in wages can make a large difference (provided that isn’t eaten up in fees, taxes, or the like).

Agreed.

How are you going to save for retirement with half your income going to just the roof over your head? Well, maybe if you were earning $10,000/month that would be possible, but frankly, by the time I pay my rent and other unavoidable expenses there is nothing left. In fact, I lose ground most months and only very careful management of “windfalls” (quarterly bonuses at work, the occasional money the spouse manages to bring in, annual tax return, gift money from birthdays, sale of possessions, etc.) keeps us current enough on the rent to avoid eviction. It’s not a matter of cutting back and being frugal for those of us on the bottom, the working poor making under the official poverty line - there is nothing left to cut.

OK, you just pointed out that you could but don’t wanna. That’s a choice and not a barrier. If you choose to live in a mobile home then after a few years it would be paid off. Take the difference between the rent you’re paying and lot rent and multiply that 12 times a year times the working years of an adult (45). Now let’s have a discussion about the number of people who retire with nothing. Just for the heck of it lets say the difference averages $300 a month. That’s $162,000 . If that is invested in an IRA at 5% interest it adds up to $962,774.

Now if you retire living in a mobile home do you want the $300 a month savings added to your social security plus $962,774 in the bank or do you want to live in an apartment with none of the savings and nothing in the bank? these are choices that add up over time.

The end result of life’s choices is not a lecture. We should all be so lucky. And credit scores can be repaired so it’s not the end of the world. The end result of choices are the consequences.

I worked part time and went to school part time to avoid student loans. I lucked out and got a job at a company that picked up a lot of the tab but I still went to school part time. My life style went up a bit but my financial strategy went unchanged and the timeline to graduating went unchanged. If I lost that job, and eventually I did, there was no student loan over my head. There was also no living expense over my head because I planned ahead. I gave up cable TV and lived within the financial plan I put forth. Had I stayed in the mobile home there would have been more money in the bank. Had my house not been paid off I would have sold it and gone back to a mobile home. This was part of my plan. Is there some luck to it, of course. I could have lost my job sooner. Did my planning make a positive difference, of course. It made a HUGE difference.

You have to agree that people should actively plan for their future. Nobody is going to do it for them.

You’re creating a strawman of “can’t” with the example of a house. You can stay in the mobile home forever and rake in the dough. I’ve known people to do just that. You’d never know they brought in $70K a year and had virtually no living expenses.

There’s no excuse for healthy adults to go through life on subsidies. So for discussion purposes we’re always talking about what is possible for **most **people through **most ** of their lives. Not temporary hardship. If you start throwing out a bunch of “what if’s” then you’re going down the path of poor decision making and there really is no fix for a life time of that. Everybody makes mistakes but not everybody is stuck on poor planning or limited to the choice of an apartment.

The vast number of people living in an apartment have a disposable income and they spend it on things that do not help them financially.

From this point forth in the discussion I expect nothing but a series of “what if” doomsday scenarios that would financially ruin Bill Gates. But instead of trying to prove it’s possible to be ruined financially I’m asking people to think in terms of what society would be like if people more actively engaged in planning their future.

What’s wrong with renting? Owning a home isn’t for everyone.

If you really want to own, but can’t afford to do so where you want to live, one strategy some of my friends use is to buy a rental unit where you CAN afford it, rent it out, and then rent a home where you want to live. A bit more complicated, but it gets you into the housing market.

This.

Much of it comes down to priorities.

And not just in regards to housing expenses. I know a lot of people who say they “can’t afford” medical insurance, life insurance, and dental checkups, yet they can afford iPhones, booze/drugs, new cars, and Cable TV.

It guess that’s my point. The rule presupposes some things. Maybe those “things” either aren’t in play for everyone anymore, or maybe there’s some more flexibility in how you play those things if you’re savvy enough.

For instance, let’s say that I can either pay 50% of my earnings to live within walking distance of my workplace, or pay 35% of my earnings to live 30 miles from my workplace. In the first scenario, yes, I am paying a grip of money. But I don’t have to have a car. I don’t have to pay for gym fees because I get my exercise naturally. I also have more time in the day for leisure, which means I am happier. Because I am happier, I don’t care that I can’t afford cable TV or fancy dining-out. Maybe I can pull off 50% to rent as long as I remain childless–and that’s perfectly fine by me.

Maybe the “35% rule” was invented by miserable people who needed to justify to themselves why they should make themselves miserable. There’s all kind of received wisdom out there that may not apply to everyone, all the time.

Notice that I said that hiking the minimum wage won’t help much. Yes, every every nickle and dime will help. But not all renters are making minimum wage. Not everyone has folks rallying in the streets, fighting for pay increases on their behalf. (That sounds snarkier than intended, sorry.) And also, if your rent goes up 3% every year, a once-every-decade hike isn’t going to help you all that much.

What happens when I buy this property that no one wants to buy and I’m stuck with a white elephant? If there are job opportunities in another state, I can’t take them. Because I was stupid and bought a mobile home when I was 19–foolishly not thinking about what I would be doing in the future. POOR CHOICES!

When I was in 19, I was a sophomore in college. Every penny I had went to college expenses, because as a 19-year-old-kid, I’d been taught that a college education would reap huge benefits, especially with me being black and female. I had a limited amount of money to work with. It was either buy a mobile home out in a distant suburb somewhere, or buy a BS from Georgia Tech. I think the choice I made was a pretty dang smart one. But I would never think to negatively judge the 19-year-old who decided to make the choice you made. Both of those are smart choices when they result in success. They can also be stupid when they result in colossal failure.

I don’t understand why you think this is a conversation about “choices”. The situation we’re talking about is the direct result of lack of choice. If there were a lot of reasonable choices available to people right now, there would be no problem at all.

I can think of a number of plausible scenarios that can happen. Like winning the lottery. That doesn’t mean I’ll roll my eyes at people who decide to take their chances on another strategy.

WTF, dude. I’m not talking about “what ifs”. I’m talking about the majority of renters. A huge percentage carry student loans–government-subsidized loans. Another huge slew of them are victims of the most recent housing crisis–which was also government subsidized. They are working to pull themselves up by their own bootstraps, but they are finding themselves in situations where this is becoming very difficult. It’s pretty hard to pay off debt when almost all your wages are going to rent. And it’s hard to pay rent somewhere (thus leaving your parents’ basement or government-subsidized housing) when you can’t afford a deposit. It’s pretty hard to find work in an area when you can’t afford to live there.

An individual can make all the right choices and find themselves in this predicament.

This thread isn’t about homeownership. It’s about renting and how difficult it is for a lot of low-earners to rent nowadays. I’m a huge fan of renting; it certainly has been rewarding for me. But it does have downsides, as a lot of people are realizing. There’s an article in the OP.

Absolutely. But I don’t think these sorts of considerations have really changed very much. Wouldn’t they have applied in “a bygone era” just as much as they do now?

When my parents were coming up, it was very much expected for young couples to get married, buy a house (preferably out in the suburbs), and raise a family. My parents were in their early 20s when they got married, and they were very typical of their generation.

Millenials, in contrast, are marrying later. They are also waiting to have children. And as a result, not in any mad hurry to buy houses.

They are carrying huge student debt, which probably explains their “delayed adulthood” (gag). But there are also quite of few Gen X’ers such as myself who are single and childless and not because they are too poor, but rather because they are content. I’ve been renting for so long probably because I’ve never had any reason to care about good schools or spacious backyards for the kiddies.

Folks like us have always existed, but not in significant percentages. At least not enough for people to recognize that MAYBE the “35% rule” applies to people who want certain things out of life…and that it’s perfectly okay to not want those things.