Rent is a Fact of Life for Many
Many of Nations Lending clients are in areas where rent has been increasing. So it is of great interest to them, and us, whenever news comes out about rents because places known for their high rents, which in turn impact affordability of housing.
Sure enough, a recent survey showed that rent affordability is suffering in New York, Los Angeles, Miami, San Francisco, San Jose and San Diego. Renters in these areas should expect to spend a minimum of 39.4 percent of their income on rents, which is above the national average of 30 percent.
In this particular survey, Zillow analyzed rent affordability in 89 of the largest metros from 2011 to 2014, and found that even in 2011 these six cities were ranked as the most unaffordable places to live, and the problem is getting worse. Part of the reason why these cities are unable to be relieved of their unaffordability is largely attributed to the number of authorized new buildings that are approved. Rent becomes more affordable as more building permits are authorized and in L.A., San Francisco and San Diego, there were less than 200 new units permitted in 2012 and 2013 for every 1000 new residents from 2012 to 2014.
Although having enough land to construct new buildings is also an issue and these six cities are authorizing larger buildings at a higher rate than the rest of the country. More than 60 percent of permitted units in each of the six unaffordable metros were in buildings with five or more units. Unfortunately, Nations Lending potential borrowers see that rent is still unaffordable in these areas and will continue to be due to a lack of permits being issued to keep up with the growing population and much of the multi-family construction has been geared towards the luxury market. And we know that high rents both drive people toward ownership but at the same time limit their ability to save for it.