Boston renters are falling further and further behind owners
According to Zillow’s latest quarterly report, the average Boston renter is spending 34.4 percent of their monthly income on rent.
Not that you need to be told this, but rent in Boston is really high – and, in fact, is getting higher, especially as a percentage of renters’ income.
According to Zillow’s latest quarterly report, the average Boston renter is spending 34.4 percent of their monthly income on rent, while the historic average from 1985 to 2000 was 27 percent.
In comparison, people with mortgages are spending, on average, 21.7 percent of their monthly income on payments, when historically from 1985 to 2000 it was 26 percent.
Though Boston is a particularly bad example of this trend, it is not a complete anomaly.
“Overall we are seeing rental affordability getting worse and worse across the country and many markets are seeing their worst quarter ever since we have been tracking data,’’ Svenja Gudell, chief economist at Zillow, told Boston.com. “Folks are spending larger percentages of monthly income on rental than they ever did.’’
Why is renting eating up so much of people’s income?
“Most people tend to blame rents, and in some parts of country they have been rising much more,’’ Gudell said. “But the problem is rising rents and incomes that aren’t showing same growth rate.’’
In other words, renters are facing the dual pressures of stagnant wages and rising costs. The latter phenomenon is worse in some places than in others.
“In some places like Seattle, Boston, and San Francisco we are seeing high rents that are rising very fast,’’ Gudell said.
Usually, she said, rents rise 3 percent per year. In Boston, rents are rising 6 to 7 percent per year. There’s a high demand for rentals, but too low of a supply to keep up.
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The situation goes beyond Boston.
“You would normally see a healthy conversion from rental to for sale as folks age,’’ Gudell said. “But we aren’t seeing that as much right now because people are having trouble saving for a down payment or qualifying for mortgages and finding a house.’’
She said that people in the bottom end of the market have it worse. Part of the reason for that in Boston is that so much of what is being developed is in the luxury realm.
Also, based on permit data from 2012 and 2013, there are currently 299 construction permits in Boston per 1,000 people moving in.
“That’s on the low end,’’ she said.
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