A recent report from the Center for Housing Policy uncovered the fact that the number of renters paying 50% or more of their income for rent has increased to one in four.
According to the study, median housing costs of working renters rose nearly six percent between 2008 and 2011, while their median incomes fell more than three percent.
If this disparity continues to climb, the rental industry could begin to see ripple effects before long, including:
1. High Turnover: If monthly rent continues to consume higher percentages of their income, tenants will be left with no alternative than to seek cheaper apartments that may be less desirable for them. They may move to smaller or less geographically desirable apartments, just to keep their head above water.
2. Rent Concessions: Landlords may see an increase in requests for rent reductions, as tenants struggle to make ends meet. This may happen upon renewal, or before new tenants move in.
3. Late Pays and Defaults: The worst case scenario will be a steady increase in late rent payments, with some tenants defaulting on their leases as they get further and further behind.
4. Renters Turned Home Owners: With mortgage rates hovering around historical lows, and demand driving up rents, more qualified renters are finding it is more affordable to own than it is to rent.
But it’s not all bad news.
The Center for Housing Policy report also states that median incomes appear to have improved slightly over the most recent year, yet still have not fully rebounded to 2008 levels.
If the downward trend has leveled off and is starting to slowly turn around, there may be a light at the end of the tunnel for tenants, as their discretionary income begins to show positive growth.
Landlords who provide amenities or conveniences to reduce the financial burden of their tenants are more likely to be insulated from these challenges. For instance, here are a few examples of amenities that can make a big difference for tenants:
Apartments located near public transportation, so tenants can save money on auto transportation and parking expenses;
Easy access to grocery stores and other amenities that reduce the expense and hassle of daily errands;
On-site laundry facilities that reduce the cost associated with these simple, yet time consuming chores;
Strategies that might reduce the cost of utilities, helping the tenant to reduce their costs while providing higher value for the landlord as the economy begins to recover; and,
On-site fitness facilities that make it easier for tenants to exercise at home, rather than spending extra money for a gym membership.
Landlords who are sensitive to the financial plight of their tenants are more likely to weather the storm alongside them, resulting in happier tenants, lower turnover costs, and more profitable rentals.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.
Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.
