Demand pushing up cost, squeezing renters


Published January 5, 2014
By Amanda Oglesby

In the years since the Great Recession tumbled housing prices and eviscerated personal incomes, a growing number of Americans have given up their homes and turned to renting.

But as rent increases have outpaced income growth in the U.S., according to a recent Harvard University study, millions of Americans are feeling the financial squeeze.

The pressure is even more pronounced around the Jersey Shore, where a superstorm Sandy-damaged housing market forced many flooded homeowners to rent inland apartments. The surge in competition for rental properties has driven up prices and left many middle- and lower-income families struggling to afford housing.

Nadine Demczyszyn is straining to pay the $2,600 monthly rent she needs for her Jackson home. Her printing and graphics business has slowed as the local economy has stagnated; and just last summer, she was forced to leave another Jackson home that cost $2,750 per month.

Demczyszyn, 47, needed to find a house with, ideally, four bedrooms to accommodate herself, her husband and three children. To downsize, she looked for a three-bedroom, but rentals of more than two bedrooms were expensive and hard to come by, she said.

“There was nothing being rented that was a normal-size house,” she said. “It was either a big McMansion house or a dilapidated piece of junk.”

Compounding her problem, Demczyszyn said, was the fierce competition for rentals. The family hired a real estate agent to help them look for homes. With moving costs, security deposits, and the first month’s rent, the Demczyszyn’s spent $9,100 to move last autumn, she said.

“We’re dying a slow death,” she said. “We spent the last $15,000 to our name.”

Rising demand

Many middle class Americans are in the same predicament.

In 2013, 43 million Americans rented their homes, according to Harvard University’s Joint Center for Housing Studies. Rentals increased from 31 percent of the nation’s housing stock in 2004 to 35 percent in 2012, researchers found.

As demand rose, the number of rental homes on the market increased by 3.4 million between 2007 and 2011. Most of those — 3 million — were the result of single-family, owner-occupied houses being converted to rentals, according to the Joint Center for Housing Studies. At the same time, vacancy rates for rentals dropped from 10.6 percent in 2009 to 8.5 percent in 2013, and net operating income rose between 2010 and 2013, researchers found.

While landlords benefited, renters paid the price.

In 1960, less than 25 percent of renters spent 30 percent or more of their income on rent. But in 2010, 50 percent of renters in the United States paid more than 30 percent of their income in rent, the Joint Center for Housing Studies found. Of those, 27 percent spent 50 percent of their pay on housing, researchers found.

In 2013, an estimated 67 percent of renters living in Ocean County and 64 percent living in Monmouth County could not afford to rent an average two-bedroom apartment, according to the Housing and Community Development Network of New Jersey. Average costs for two-bedroom apartments in both counties were about $1,410 per month, meaning a family would have to earn $56,400 to make the apartment affordable, according to the network’s figures.

“We’ve had a problem for a long time. After Sandy, the problem just got a lot worse,” said Nina Arce, media coordinator for the Housing and Community Development Network of New Jersey. “We have a very imbalanced housing market. You can find a McMansion no problem, but not many of us can afford those.”

Though the economy is partly to blame — pay cuts and layoffs have strained New Jersey workers — there is another factor at work, Arce said.

“There’s been a lot of restrictive zoning in many municipalities. They just don’t want to build those multi-family homes, those starter homes,” she said. “It’s just a way of keeping out lower income people.”

Efforts by the state Council on Affordable Housing to develop more lower-income housing options have been weakened through legal battles between state courts and Gov. Chris Christie, Arce said.

Less money for food

The Harvard researchers found that high housing costs were a contributor to hunger in America, as cash-strapped renters spent about 40 percent less money on food than other Americans. They also spent less on health care and retirement savings, according to the study.

“There’s a new face to lower-moderate income,” Arce said. “Your neighbors that you never would have thought would be seeking assistance, are seeking assistance… Everybody is living hand to mouth.”

It was a divorce that started 45-year-old Liz Cochrane’s financial troubles. The Ocean Gate homeowner paid $1,622 monthly for her mortgage on a home and adjacent cottage. Earning only part-time pay, she was planning to move out of the main house, which she would rent, and live in the cottage to afford the mortgage, she said.

But her plans changed when superstorm Sandy hit and destroyed the cottage and damaged her home. In 2012, Cochrane said she stopped paying the mortgage. With rentals costing about $1,400 in Ocean County, she is unsure whether to leave or try to work out a plan with her mortgage company.

“I care about the house. I care about my name and I care about the mortgage, but my hands are kind of tied,” Cochrane said.

Maureen Mulligan, executive director for Coastal Habitat for Humanity, based in Asbury Park, said middle-class Americans are being squeezed by expensive housing costs.

Rising rents

After Sandy, some landlords used money recouped for flood damage to renovate and upgrade their apartments, then boosted the rents, Mulligan said.

New Jersey is the fourth most expensive state for renters, according to the Housing and Community Development Network of New Jersey. A worker must earn at least $24.84 per hour to afford an average two-bedroom apartment, according to the network.

The mean wage for renters in the state is only $16.77 per hour, according to the housing network.

When John Morales, 63, gave up his Howell home of 14 years because his income as a laboratory technician did not rise at the same rate as his taxes and expenses, he said it was the “saddest and worst” day of his life.

“I couldn’t keep going the way I was going,” he said.

Morales said that selling the house — the place he lived when his oldest daughter was married and his youngest child’s graduated from high school — was like losing a piece of the American dream.

But more than a year after the sale, Morales believes he and his wife are better off. The two now rent a home in an adult community in Brick, he said. Renting has allowed him to concentrate on fewer aspects of the home’s maintenance and worry a bit less about money, he said.