Many Americans are familiar with the 30% rule, which states that housing costs should never consume more than 30% of household income. But as it turns out, that old rule has become untenable for apartment dwellers these days.
For the first time, American renters are spending this astronomical percentage – or more. Moody’s Analytics calls this a “rent charge”. Squeezed tenants may prefer to call it the financial equivalent of living in a closet.
Meanwhile, skyrocketing mortgage rates have prevented many Americans from moving from renter to homeowner. This, in turn, meant a shortage of rental units, prompting landlords to raise prices. And in some states, that leaves renters paying up to a third of their salary in rent alone.
states of despair
In Massachusetts, Florida and New York, Americans spend 32.9%, 32.6% and 31.2% of their income, respectively, on rent. Assuming you earn $71,456 (the US median income in 2022), if you live in the State of Florida, you’re actually sitting under a dark cloud: paying about $6,000 a month in rent, based on that income and 32.9 % numbers.
Florida has also seen a substantial jump in rental costs: 4.2% over the past three years, according to Moody’s. The blame lies largely with supply and demand, the biggest problems for renters and landlords today.
With fewer homes available, rents continue to rise; As interest rates rise, homes become less affordable — even though in most parts of the country the seller’s market continues to dominate.
What’s more, homeowners spooked by the prospect of buying a new home with high interest rates set the kibosh in motion.
See more information: The total value of your property is worth more than you think — spend less to protect your assets
What can Americans do?
For many renters, staying put may be the better option. If you have a good relationship with the landlord, you may be able to avoid a raise.
One effective way involves an exchange, where you agree to take care of minor maintenance needs and thus avoid expensive handyman calls to the building owner.
But if those options aren’t possible and you’re spending more than 30%, consider other accommodations that come with a cheaper price tag – even temporarily. New graduates may hate the idea of moving back in with their parents. But in addition to buying some breathing space, they can save enough money to cover housing costs when they move again.
You might also consider:
Sublease What You Have: If you rent in a big city, you may have two options to make money right away: sublet your storage and parking. If you rent what you have, even at a small loss, it will help reduce the overall housing value. Why stop there? Look for mobile apps to help you rent other items. Consider services like Turo for your car and Yoodlize for general items.
Leveraging Your Rewards Credit Cards: Assuming you can pay your monthly expenses in full, use your credit card whenever possible to earn rewards points that rack up virtually any award from air travel to groceries — or even cash back.
Paying interest-bearing debt: After using your credit card several times, make sure you pay off your balance. Interest paid on credit cards is money thrown away. Period. And if fees are exorbitant – say in the 20% range – making the minimum payment is equivalent to pumping water out of a leaky boat.
Putting It All Together: Don’t Give Up
High rents are disheartening – if you think you’re working just to pay for a place to live and your dreams of home ownership are on hold, you’re not alone. What to do?
Before starting financial freedom, a rich mindset must come first. Worrying about the things you can’t control—including the landlord’s decision to make more money from tenants—will get you nowhere.
When you focus on what you can control — budgeting, creating passive income, or negotiating price reductions — you’ll be on your way to beating percentages and discovering the one thing money can’t buy or rent: hope.
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This article provides information only and should not be construed as advice. It is provided without any kind of warranty.