The ‘30% Rule’ Has Gone Out the Window, and People Are Paying the Price of Rent Burden
If you’ve ever had any old-school personal finance advice shoved down your throat, you’ve probably heard about the 30% rule. That’s the one that says a person’s housing expenses shouldn’t take up more than 30% of their income. You may have also encountered it while applying for an apartment. If your landlord required you to prove your income was at least three times the monthly rent, this is why.
But the 30% rule isn’t just something that Dave Ramsey shouts out in his sleep. It’s a guideline put in place by Congress in 1981. It was found that when the average income spent on rent in a given community rises above that, housing insecurity and homelessness in that community increase rapidly.
Since then, the number of American households that are rent burdened has increased to 46 percent. Of those, 24% were considered severely rent burdened, meaning they spent more than 50% of their household income on housing costs.
Why Are So Many People Rent-Burdened?
While the millions of renters who are currently rent-burdened may find the 30% rule impossible to abide by and extremely out of touch, some people still manage to live by it. If you haven’t looked at rental prices in a while, or you happen to live in one of America’s last remaining pockets of affordable housing, those numbers may shock you. You might envision millennials stubbornly renting out lavish mansions with more rooms than they can either use or afford while being forced to forgo their daily avocado toast and soy milk latte.
While it’s possible that person exists, most rent-burdened Americans are just regular families living in standard housing reasonably close to their work. Some are even paying a pretty penny for less than that. The problem isn’t that people are bad with money. Rental prices have been allowed to increase to astronomical and unattainable levels, and ordinary people are struggling to afford basic necessities.
This interactive map shows the areas where people are rent burdened at the highest rates. While it is slowly but steadily creeping across the entire nation, it’s most notable right now along the coasts as well as in urban areas. You may also notice an overlap between heavily rent-burdened areas and areas where a lot of unhoused people live. That is not a coincidence.
How Rent Burden Can Lead to Homelessness
Since nearly half of all renters in the US spend more than 30% of their income on housing each month, and nearly a quarter of us spend more than half, millions of households are left in an extremely precarious position. There is very little wiggle room in a budget like that to absorb the inevitable emergency expenses and unexpected income cuts that can come along at any time.
Someone spending only a quarter of their monthly income on rent might be able to rearrange their budget enough to scrape by. But it’s challenging to come up with a rent payment that’s half of your income, even if you do opt to sacrifice groceries and gas money.
A few missed rent payments can quickly lead to an eviction, leaving you nowhere to go but the street or a shelter. And as we’ve discussed before, having an eviction on your record can make it difficult to secure housing later on, even if you manage to get back on your feet financially.
Having such a small margin for error in your monthly budget makes it that much less likely you’ll be able to recover from an emergency when it comes your way. It can allow small setbacks to snowball into life-changing circumstances. Being rent-burdened or severely rent-burdened is like walking a tightrope without a safety net. If you fall, you’ll just keep falling.
How We Can Reduce Rent Burden
We can hope for a cultural shift that forces all unethical landlords to wake up and feel the guilt of making a profit off of commodifying a human right and causing incalculable human suffering. Or an uprising of the people that makes them at least fake that kind of concern. It’s always possible that community-led initiatives to provide housing to those who need it at an affordable price will expand until they can reach everyone who needs them.
Many think the most realistic way to reduce rent burden relatively quickly is to pass legislation.
Rental prices have been increasing more or less unchecked for too long. There’s no invisible hand that’s going to stop it any time soon. While we can undermine and operate around it for a time, nothing short of legislation and aggressive enforcement will stop corporate greed on this scale.
Get involved with community organizations working to protect tenant rights and increase the availability of affordable housing in your area. You may be surprised by how many organizations you find and how long they’ve been working toward this goal.
There are a lot of different paths you could take to make housing a human right rather than a commodity for corporations to profit from.
This is not a new idea. But if it is for you, I encourage you to connect with your local organizations working toward that same goal. Learn the history of their efforts in your local community – what’s been done, what still needs doing, and how your skills and talents fit in. Don’t feel like you have to start from square one alone. There are probably plenty of like-minded people you can connect with and join in the community. Remember, we’re stronger together!