For years, renters have been feeling the heat as they write out those checks to their landlords each month.
As the cost of buying a home has gone down, renting has become progressively more expensive, Bloomberg Businessweek reports. Between 2008 and 2011, renters’ housing costs have increased 6% while their income declined 3.2%.
A few different factors contribute to this rental squeeze. For one, rental housing is scarce: In 2010, low-income families outnumbered affordable units by 5.1 million. Additionally, the U.S. government—in support of the American Dream—offers many benefits to those seeking homeownership, including the mortgage interest tax deduction, while leaving renters out in the cold.
However, things may turn around a bit for renters as the Senate examines a potential tax code overhaul. The Bipartisan Policy Center suggests an expansion of the Low Income Housing Tax Credit, which is an incentive to revamp or build low-income housing. The Center on Budget and Policy Priorities proposed a credit that would reduce the tax burden on landlords who charge less than 30% of a family’s income in rent.
But any change from Congress will be slow in coming.
If you have to rent now, rent within your reach. In general, your rent should never be more than 30% of your net take-home pay. Anything more than that will affect how much you will be able to put in your emergency fund or save for retirement.