Corporations who manage large portfolios of rental property want us to believe that supply and demand will keep the rental market affordable. Even in an affluent state, like Massachusetts, this is not true. Rents rise far faster than income. Renters choose between spending more than a third of their income or moving.

“The reality is that rents can only rise as incomes rise,” [RealPage’s Jay] Parsons told The New York Times last month. “If people can’t afford it, you can’t lease it.” 

WRONG! FALSE! A total fabrication.

The year before the pandemic, roughly 46% of renters in the U.S. spent more than 30% of their income on rent and therefore met the definition of cost-burdened, Harvard University’s Joint Center for Housing Studies found.

Rental prices have continued to climb since 2020.

Ben Teresa, co-director of the RVA Eviction Lab at Virginia Commonwealth University, wrote on Twitter:

One of the defining characteristics of housing markets in the last 40 years has been rents increasing faster than wages.

The problem is quite precisely that people are paying rents they can’t afford.  [source]

 

Paying more rent than you can afford: How unaffordability increases inequity

The lower a household’s income, the more the household suffers from paying more than they can afford for rent. The reason is obvious. There is less cash available after rent is paid to cover all the other needs of these households.

  • Statewide Massachusetts median household income: $84,385
  • Wealthiest town median income, Dover, MA (highest: $250,000
  • Poorest city median income, Springfield, MA (lowest): $41,571 [source]

Rental cost and household budget. Renting a $2500 a month apartment:

Example 1: Statewide median income.

$84,385 divided by 12 = 7,032 Minus rough estimate of income tax (-$1250) = $5782 monthly after-tax income.

$2500 rent = 43% of monthly after-tax income, leaving $3282 for all other expenses.

Example 2: Median income household in Springfield (lowest city).

$41,571 divided by 12 = 3,464, approximately $3172 after tax income, per month.

$2500 rent = 79% of monthly after-tax income, leaving $672 for all other expenses. That $2500 rent breaks the budget.

Example 3: Household with one full time minimum wage worker.

Now consider that Massachusetts minimum wage is $14.25 going up to $15 in 2023. If there is a single full-time worker in the household, that comes to $31,200 annually, as of 2023. After tax monthly income = $2,283 monthly after-tax income.

That $2500 rental is impossible.

Example 3.a Let’s double that, and assume there are two minimum wage earners, full time, in the household. That is an annual income of $62,400. After tax monthly income would be about $4396.

$2500 rent = 56% of monthly after-tax income, leaving $1896 for all other expenses. That’s close to impossible, too.

Geography changes how far your dollars can stretch. Someone earning the statewide median income ($84,385, example 1) can stretch their budget to rent a $2500 apartment. Closer to the Boston, rents are frequently higher than $2500 for two or three bedroom rentals.

Median incomes are higher, too, in towns and cities commuting distance to Boston. For every town that has a median household income closer to the top ($250,00), there is a town with a median income closer to the bottom ($41,571). The poorer towns are concentrated away from Boston, and the jobs that are generated out of Boston. Check out the map.

The affluence of eastern Massachusetts

A former Somerville City Councilor, Stephanie Hirsch, sent a worksheet that showed how impossible it was to live in Somerville on $36,000 a year. (That is just a bit more than one full minimum-wage worker earns and is more than some seniors on Social Security.)

Here’s the calculator for trying to balance that budget. 

53 million American workers earn less than $36,000 a year. That is 44 percent of all American workers. [source] That total is for someone making $17 an hour. The $36,000 figure assumes a full-time employee with 100% medical coverage.

What would you give up to pay your rent? If you tried it, you know that eastern Massachusetts is unaffordable to full time workers who are not making a professional income. Really, try this calculator.