Most financial advisors warn that renters should pay no more than 30% of their income on rent. So, for example, if you make $3,000 per month, you would want to cap your rental cost at $1,000 per month.
However, due to record-high increases in rental rates this year, many tenants are now spending upwards of 42% of their monthly income on rent alone.
This year, the cost of just about everything, including food, gas, utilities, and especially rent, went sky high. As a result, American budgets are stretched ultra-thin, with many people "at the breaking point," creating a dangerous financial situation where people can no longer save their money.
A recent survey by Lending Club revealed that 61% of Americans are already living paycheck to paycheck. If you're a millennial, that number soars to 70%. That survey also found that nearly two-thirds of Americans would not be able to cover an emergency expense of $400 right now because they have to pay more of their monthly income to get less.
Right now, the average American household is paying an extra $3,600 per year to maintain the same standard of living that they had last year. A big reason for that is that rental housing costs across the country have gone up significantly.
In places like Tampa, Florida, where rents have increased more than 31% in the last year, it has become "the norm" for people to spend over 42% of their monthly income on rent alone. These increases have become unsustainable, even for many middle-class renters who have "good-paying jobs."
While some places are considering implementing rent control measures to help protect tenants, many locations are not, leaving lower-income renters with very few options.
Where do these people go when the rent becomes unaffordable?
Have you been affected by the rise in rental prices this year?
Let us know in the comments.