In San Francisco, rent in majority Black communities consumes about 75 percent of renters’ median income, according to the Zillow report.
With rent on the rise in communities nationwide, the affordability of rental units has become a pressing issue, specifically in nonwhite neighborhoods. Now, Black and Latino residents find themselves forking over almost half their incomes just to keep a roof over their heads.
A recent report by real estate database company Zillow showed that in 2016, it took 44 percent of income to make rent in predominately Black communities, while those living in majority Latino neighborhoods spent 48 percent of their income on rent. Numbers for both communities are up from five years ago, when African-Americans shelled out 40 percent of their income in the form of a monthly rent check and Latinos spent 41 percent.
Over in predominately white communities, however, renters only spend about 30 percent of their income on housing, falling in line with the “30 percent rule of thumb” that says it isn’t best for renters nor buyers to spend over 30 percent of their gross income on housing every month.
Economists at Zillow have called this lopsided phenomena nothing short of an “affordability crisis.”
“This research sheds light on another example of inequality in the housing market,” said Dr. Svenja Gudell, a chief economist at Zillow. “Renters in African-American or Hispanic neighborhoods find themselves in a catch-22 situation: While owning a home is a great way to build wealth, you need to save up some cash to be able to buy. If you’re spending close to half of your income on rent, saving for that down payment is going to be incredibly difficult.”
The report also attributed slow wage growth to the affordability gap and highlighted the fact that, while rent is often cheaper in nonwhite neighborhoods, those same areas haven’t stood to benefit as much as white communities when it comes to improvements in the job market. For one, Fortune reported that the average income for households in Black communities has jumped about 2.9 percent in the past five years, compared to a 5.4 percent increase in white communities.
The inability to afford rent has negative consequences for residents struggling to pay, sometimes forcing them to forego other important expenses such as medical care and saving for retirement. Devoting nearly half of one’s income to rent each month makes economic mobility that much harder as well.
Gaps in rent affordability were especially wide in cities like Boston and Los Angeles, according to the report. Residents in Boston’s majority-Black communities spend 71 percent of their median income to make rent, followed by 60 percent in Latino communities and just 35 percent in white communities.
In the City of Angels, white renters spend about 50 percent of their income on rent, which is still far less than what renters in Black and Latino communities pay. Renters residing in these areas pay a premium of 63.7 percent and 63 percent, respectively, the report shows.
Of the 26 cities examined by Zillow, Atlanta had the narrowest affordability gap, with rent consuming about 32 percent of income in Black neighborhoods and 27 percent of income in white neighborhoods.
