While the rising cost of living in American cities has significantly impacted the spending habits of millennials who live and work in them, a new study indicates that the issue of unaffordable housing extends well beyond the 18-25 year old generation.
According to a new report by the Joint Center for Housing Studies (JCHS) at Harvard University, nearly 39 million people in America cannot afford their housing.
Housing experts say that while housing is usually the biggest expense in a monthly budget, it is a good idea to limit it to 30 percent of one’s overall budget. According to the JCHS study, roughly one third of American households surpass the 30 percent threshold in household budget spending.
The study also found that 19 million Americans spend more than half of their total budget on costs related to housing. While this figure does include households that are making mortgage payments on properties they will eventually own, researchers also noted that nearly 11 million Americans who currently rent still end up spending spend more than 50 percent of their overall budget on costs related to rent payments and other related expenses.
Overspending on temporary housing may be possible for certain portions of the population in the short term, but it can be especially damaging in regards to retirement prospects in the long term. Recent trends indicate that larger numbers of millennials spend generously on renting apartments and experiences such as dining out, but have not yet begun saving for eventual retirement, unlike earlier generations.
One factor that hurts tenants in the real estate market is that the nationwide rental vacancy rate has been steadily dropping over the last decade. This results in less competition among landlords, which can drive up prices in areas where housing is in high demand.
Additionally, new housing projects have stalled due to a shortage of construction workers. While many workers left the job market during the housing crisis of 2007, the demand for new construction workers has risen dramatically in the last 4 years, with many U.S. cities struggling to find able-bodied workers willing to do the job.
Despite prospects looking bleak, there are opportunities for millennials who are willing to think outside the box. High paying construction jobs are readily available and the rise of the sharing economy enables millennials to use their extra time or space to earn money for housing expenses.