Renters pay 50 percent of their income, too

2.1 million people may sound like a lot, but it's only around 2% of the population of non-homeowners (Google says the US population is 301,139,947 and the U.S. Census Bureau says that the homeownership rate is 68.8%). I'd say that's the fringe and not a representative characterization for renters.

Hi "anon",

Good point that the number of renters paying 50% for housing is a small number, in relation to the overall population. Is it not significant that this number has doubled during the real estate run-up?

Rona, I'm not sure that the number doubling has to do with the real estate run-up. Rents haven't gone through the roof like housing prices and have risen more in line with inflation (almost by definition since rents are part of the CPI and house prices are not). I think that the problem is that wages have not been keeping up with inflation. In fact, wages in Massachusetts actually declined in 2006. See: http://www.census.gov/hhes/www/income/histinc/h08.html

Anon,
Point taken. Good data behind your comment. You are right; the increase in high rental payments may not have been caused by the real estate run-up, it may just be concurrent.
For whatever set of reasons, twice as many people are stretched beyond reason for rent. These folks are much more vulnerable than home-buyers, in most cases. I brought this up because we were discussing buyers who pay 50% for housing.

and remember, there is no federal tax break for renting. with owning, there are many ways to manage that savings.

At least MA gives a break on state taxes for renting (I think?)

With regards to renting, there is considerably less risk to renting a home for too much money. Unless you sign a 30 year lease, you're not in for the same headaches and problems you'd face if you realized you couldn't afford your mortgage payment. (Even if you did sign such a lease, once you're in breach of it you basically just forfeit your deposit and find a new rental unit you can afford) You may have "thrown the rent money away," but you're not saddled with a couple hundred grand of debt if you miss a couple of rent payments.

A missed payment on a rental means you find a new rental. A missed payment on a house means you have to find a new place to live AND a person to buy your house from you.

At any rate, the fact the some people are as foolish about their rent payments as others are about their house payments doesn't justify high rents or obscene house prices. The fact that some people steal car stereos is not a justification for stealing cars.

I don't think people paying more than half their income in rental is people being "foolish" - rents, like house prices, have increased much faster than inflation.

The first anon poster has misinterpreted the data. The US population includes children, the elderly, etc - many people who don't own or rent because they live in a unit someone else pays for. According to the census, there are about 36.5 million rental units in the country, so if 2.1 million are occupied by people paying over 50%, that's 5.8% of renters. MA does give a state tax break for renting, but only up to $3000 - which is much less than most people pay in rent.

Owning and renting each have their own risks. As one poster points out, if you fall behind on your rent, you're not saddled with hundreds of thousands of dollars in debt. On the other hand, if you suffer a major catastrophe in your life, you have much less flexibility to rework your payments, and you have no ability to access the equity of the property you live in.