SACRAMENTO, Calif. — Rent in the Sacramento area keeps climbing and a growing number of people are having a difficult time keeping up. In the past year, rents in Sacramento have jumped about two percent, and that follows an 11 percent rise in the year before.
A recent study found more than half of Sacramento renters are cost-burdened. While there are many reasons for the increased rents, here’s one you might not have thought of: rich renters.
An Apartment List study shows that the number of high-income renters has grown more than 48 percent nationally in the past decade. In Sacramento, it’s even higher — with a 61 percent increase in high-income renters. The study identifies high-income renter households as those that earn at least $100,000 per year.
The question is, why? Why are more high-income earners choosing to rent over buy? Apartment List highlights a few key reasons.
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1) The Great Recession
In 2008, money for new housing dried up as foreclosures grew. People didn’t necessarily stop moving into houses — but instead of buying, they became renters.
A UC Berkeley study found that “between 2006 and 2016, more than 3.8 million additional households became renters of single-family homes.” The study found that by 2014, 17 percent of single-family homes were being rented. These single-family rentals are currently the fastest growing segment of the housing market.
As building started to pick back up after the recession, money started to shift from single-family homes to multi-family options, like apartments. An Apartment List analysis found multi-family construction quadrupled, with most of the development aimed at the higher end market.
Post-recession, the study found that the number of high-income renters grew by 1.8 million households.
2) Barriers to Homeownership
For those who want to own a home, it's becoming more difficult to get buy one.
After the Great Recession and mortgage crisis, it became more difficult to get a loan. Lenders tightened-up their policies and many now require larger down payments.
Just as rents are rising, so are home prices, and at a faster rate than most incomes. The latest numbers from the Bureau of Labor Statistics show annual wage growth is up just under two percent. Home prices, according to the Case-Shiller Index are up more than five percent. That means housing prices are rising more than twice as fast as incomes.
It’s not just potential homeowners feeling the burden. In Sacramento, data from the Census American Community Survey shows that from 2007-2017, rent increased by 10 percent. During that same time, income didn't increase at all.
Another factor is growing student loan debt. A Federal Reserve study found that every $1,000 increase in student loan debt causes a one to two percent drop in homeownership for those with loans. The study also found that student loans have a negative impact on credit scores, potentially making it more difficult to qualify with lenders.
3) Urban Growth
Another factor driving up the number of high-income renters is growth in downtown cores.
“High-income Americans are increasingly relocating to dense urban centers where renting and multi-family housing are more common," Apartment List said.
And according to the site, these new trends mean high-income renters probably aren’t going away.
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Sacramento (and California in general) is in the middle of a housing crisis. Rent is high in most cities, and wages have mostly remained stagnant. Is rent control the answer? ABC10's Walt Gray spoke to Sacramento mayor Darrell Steinberg to see where the city stands.