Nearly 39 million people in the U.S. cannot afford their housing, according to a new study by the Harvard Joint Center for Housing Studies (JCHS).
For most people, housing is their biggest expense – experts recommend spending no more than 30 percent of your income on a mortgage or rent.
However, the JCHS study shows a large percentage of American households surpass this guideline. Because of unaffordable housing, they have less money to spend on other essentials, putting them in difficult financial situations.
Here’s a breakdown of the research — and what you can do to improve your finances if you’re spending too much on housing costs.
Report findings
In Harvard’s State of the Nation’s Housing 2017 report, researchers found that one-third of households are cost-burdened, meaning they spend over 30 percent of their incomes on housing. The number of cost-burdened households has doubled since 2001. Even worse, approximately 19 million Americans spend 50 percent or more on housing.
The increase of unaffordable housing is due to several different factors. For one, house prices rose 5.6 percent since 2016. But there’s also a lack of inventory on the market, especially for smaller, lower-cost homes. Between 2004 and 2015, completions of single-family homes under 1,800 square feet dropped from 500,000 units to just 136,000.
For renters, the issue becomes even more difficult.
“The problem is most acute for renters,” said Chris Herbert, JCHS’s managing director, in a press release. “More than 11 million renter households paid more than half their incomes for housing in 2015, leaving little room to pay for life’s other necessities.”
The nationwide rental vacancy rate dropped for the seventh year in a row. While that’s good news for landlords, it hurts renters. With such a low vacancy rate, there is increased demand for fewer units, so landlords can raise rental prices.
Impact of unaffordable housing
When so much of your paycheck goes towards a place to sleep at night, you have to reduce spending in other areas to make ends meet.
Some households are forced to lower essential costs like medical care, groceries, or utilities. This strategy can be especially harmful in homes with children.
Nearly 25 million children live in households dealing with a housing cost-burden. To afford a roof over their heads, families may cut back on the quantity or quality of food they purchase, stunting their children’s health and development.
Other families end up forgoing retirement or emergency funds. And for families with student loans, spending so much on housing can mean falling behind on payments and risking default.
Any of these scenarios can have long-lasting consequences and can hurt you for years to come.
Can you afford a house?
In a competitive housing and rental market, finding a home you can afford within the 30 percent threshold can be difficult. Here are five tips that may help:
1. Find a roommate
While it might not be the most appealing option, finding a roommate can dramatically reduce your housing costs. Real estate website Trulia found renters save 13 percent of their income, on average, by adding a roommate to their home. In high-cost areas such as New York or San Francisco, you could save hundreds or even thousands each month.
Beyond your savings on rent, a roommate could also help you cut down on other expenses, including utilities, internet, or household supplies. If you and your roommate can come up with a schedule, you can also cut down on groceries by meal-planning and cooking together.
2. Rent out a room on AirBnB
If a full-time roommate isn’t for you, consider renting out a room (or even just your couch) for a couple of nights a month on AirBnB. Cost-conscious travelers book rooms on the app as an alternative to hotels.
Renting out a room for just a few nights can help increase your cash flow and offset your housing costs, giving you more wiggle room in your budget.
3. Launch a side hustle
If you have a roommate already or have cut back your expenses as far as you can, increasing your income is key to improving your housing situation. If a raise at your full-time job isn’t in the cards, starting a side gig can be a huge help. You can work on your own schedule when you need the money. On average, people with side hustles make $500 a month.
4. Sign up for an income-driven repayment plan
If you have federal student loans and are struggling to keep up with both your housing payments and your loan bill, one option to consider is an income-driven repayment (IDR) plan.
Under an IDR plan, the government caps your payment at a percentage of your discretionary income, reducing your payments.
5. Refinance your loans
If you have high-interest private loans, another option is to refinance your loans to increase your cash flow. By refinancing, you could get a lower interest rate or extend your repayment term, lowering your monthly bill.
Bottom line
The JCHS report highlights how unaffordable housing can affect people in many different ways. If you are thinking about buying a home or renting a new apartment, make sure you understand why it’s so important to stay within the affordable range to protect your long-term finances.
Interested in refinancing student loans?
Here are the top 8 lenders of 2020!| Lender | Variable APR | Eligible Degrees | |
|---|---|---|---|
| Check out the testimonials and our in-depth reviews! 1 Important Disclosures for Earnest. Earnest DisclosuresTo qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application. Earnest fixed rate loan rates range from 3.20% APR (with Auto Pay) to 6.99% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.89% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of December 13, 2019, and are subject to change based on market conditions and borrower eligibility. Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. The information provided on this page is updated as of 12/13/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product. © 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America. 2 Important Disclosures for SoFi. SoFi Disclosures
3 Important Disclosures for Figure. Figure DisclosuresFigure’s Student Refinance Loan is a private loan. If you refinance federal loans, you forfeit certain flexible repayment options associated with those loans. If you expect to incur financial hardship that would impact your ability to repay, you should consider federal consolidation alternatives. 4 Important Disclosures for College Ave. College Ave DisclosuresCollege Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. 1College Ave Refi Education loans are not currently available to residents of Maine. 2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation. 3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. 4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 1/1/2020. Variable interest rates may increase after consummation. 5 Important Disclosures for Laurel Road. Laurel Road DisclosuresLaurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association. ANNUAL PERCENTAGE RATE (“APR”) FEE INFORMATION There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account. LOAN AMOUNT For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans. ELIGIBILITY & ELIGIBLE LOANS Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements). Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment. All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions. For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned. INTEREST RATES The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency. DISBURSEMENT OPTIONS The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired. POSTPONING OR REDUCING PAYMENTS After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends. We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment. If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments. KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. This information is current as of November 8, 2019 and is subject to change. 6 Important Disclosures for Splash Financial. Splash Financial DisclosuresTerms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. 7 Important Disclosures for CommonBond. CommonBond DisclosuresOffered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 1.76% effective November 10, 2019. 8 Important Disclosures for LendKey. LendKey DisclosuresRefinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution. Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810. As of 12/019/2019 student loan refinancing rates range from 1.90% to 8.59% Variable APR with AutoPay and 3.49% to 7.75% Fixed APR with AutoPay. |
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 | 1.99% – 6.89%1 | Undergrad & Graduate | |
 | 2.31% – 7.36%2 | Undergrad & Graduate | |
 | 2.06% – 6.81%3 | Undergrad & Graduate | |
 | 2.62% – 6.12%4 | Undergrad & Graduate | |
 | 2.29% – 6.65%5 | Undergrad & Graduate | |
 | 1.99% – 7.06%6 | Undergrad & Graduate | |
 | 1.85% – 6.13%7 | Undergrad & Graduate | |
 | 1.90% – 8.59%8 | Undergrad & Graduate | |
