WOW, and I don’t mean World of Warcraft. I just read an article about the cost of rent vs income and I can’t believe the huge gap. The majority of states have lower average annual incomes than the average rent. I know the economy is going strong but how do people get by when they are making less than the amount required to make rent. Something is seriously wrong.
While I am sure demand for rental property plays a part, I can’t believe it accounts for some of the huge gaps, upwards of $10,000. While I am not a proponent of government intervention and do not believe rent control would be an answer, I still think there is something wrong. Take my own state, Florida, where the average annual rent is $64k and the average annual income is $45k. That is a $19k difference. What does a family do to bridge the gap? I am not sure they can but let’s look at a couple of scenarios.
Florida is a big vacation state. I know there are a lot of people who rent their home out on a seasonal basis. Seasonal rentals usually bring in significantly more than a mortgage or rent payment. This is good for homeowners but I doubt many renters are able to do this unless they have a clause in their rental agreement that specifically allows them to sublet. However, given the huge gap we see, there might be quite a few people who are willing to take the chance. Subletting a room would help to bridge the gap. Subletting the entire house, providing you have another place to stay, preferably rent-free, would also help bridge the gap.
The other scenario I can think of is to rent a home in a neighborhood that may be a little less than desirable. A neighborhood where crime may be an issue, or one where the homes are a bit run down, or a home smaller than you would actually like given the size of your family. None of these is a particularly appealing alternative.
There is, however, one very important piece of data missing from the study as presented in the article. This one little piece of data could change significantly what we should make of the study. The author does not reveal whether the average annual income stated is family income or individual. If it is individual and not family, given a large number of two-earner households, it probably significantly understates incomes. This would mean the gap is significantly skewed in a negative direction. If the income shown in the report is actually family income then the report remains bad news and warrants attention.
Either way, our attention is warranted and continued efforts need to be made to close the gap. Not the gap the media would have us focus on, between rich and poor, but the gap between income and rent. How do we close the gap, either gap? Not through income redistribution but by improving income opportunity for all, which is what has happened under the current administration. Employment opportunities have increased, unemployment is at record lows and wages have increased. All positive events that help to close the gap.
