Essential workers dismiss space and age of home to afford rent: Zillow

Market Trend

Essential workers dismiss space and age of home to afford rent: Zillow

In September, a CoreLogic report showed that single-family rents hit a new record in July 2021, and renters are making sacrifices to afford those skyrocketing rents.

Millions of essential workers in the U.S. who have not had the luxury of working from home throughout the pandemic — including teachers, nurses and retail workers — are often forced to choose smaller and older homes to afford their rent, according to a recent report from Zillow.

A household is considered “housing cost burdened” if its residents spends more than 30 percent of their household income on rent. Zillow’s analysis of its own rental data paired with data from the U.S. Census Bureau’s American Community Survey showed that many essential worker renters are only able to keep their housing costs below 30 percent of their income by living in smaller, older rentals that usually involve more health and safety risks, according to previous research from Zillow.

Teacher rental affordability

Nationwide, the typical teacher is comfortably below the 30 percent threshold to become cost-burdened, spending 22.2 percent of their income on rent. However, that affordability comes at a price.

In Milwaukee, teachers spend 12.6 percent of their income on rent, but the rentals that help them keep this cost low are usually about 86 years older than most rentals on the market. Likewise, in Hartford, Connecticut, teachers typically spend 12.9 percent of their income on rent. Usually, they live in units 24 years older and 339 square feet smaller than the median rental unit in the area.

To afford the area’s typical local rent of $1,604, they would require a raise of $3,136 per month.

In Raleigh, too, a teacher’s typical rent burden is 14.6 percent, and their rental unit is usually 452 square feet smaller than the median rental in the market.

Fewer than 10 percent of single-family rental units are affordable for teachers with their current rent burdens in 36 of 50 metros analyzed by Zillow.

In Atlanta, less than 1 percent of all rentals on the market are affordable for teachers at their current cost burden.

Nurse rental affordability

Nurses, likewise, typically pay 18.5 percent of their income on rent at a national level. But to afford the typical rental unit in the country, which priced at $1,874 per month as of August, nurses would need a raise of $1,389 per month.

Like teachers, nurses are choosing smaller older rentals in many markets to afford their rent.

In Boston, nurses typically spend 14.2 percent of their income on rent by renting out units usually 365 square feet smaller and 33 years older than the median rental in the city.

However, in Portland, where nurses typically spend 17.3 percent of their income on rent, the units they rent out are usually just 111 square feet smaller and two years newer than the city’s median rental unit.

Minimum wage-earner rental affordability

Renters who work in jobs that typically earn minimum wage (retail, food service, etc.) are also more likely to need to make sacrifices in terms of rental size and age to meet affordability. Depending on any given market’s minimum wage, affordable options available to those renters can vary widely.

Denver and Seattle, Zillow noted, both have relatively high minimum wages compared to the national baseline ($14.77 per hour and $15 per hour, respectively), so retail workers in those cities can afford about 15-16 percent of available rentals.

Meanwhile, in Denver, food service workers can afford 11.7 percent of rentals.

But the affordability in these cities comes with a caveat — that affordability reach only extends to smaller and older rentals and often comes in tandem with living with several roommates or higher-earning partners.

In Both Seattle and Denver, individuals who work in food service and retail earn between 37-43 percent of their typical total household income.

Zillow’s report noted that relaxing zoning restrictions — as was recently done in the state of California — is one feasible way to increase inventory in different markets to help bring rent prices down.

“Basic supply and demand is the primary driver of growing housing costs, so increasing the supply of affordable housing types can help meet demand,” Zillow’s report, authored by Zillow Economic Data Analyst Nicole Bachaud, states.

“Zillow research has shown that even modest densification could exceed what is likely needed to meaningfully slow housing price growth over the long term, which could help these essential workers start thriving, instead of merely surviving.”

Jan 5, 2024 For Sellers