Welcome To The Blackstone Recovery: Over 11 Million Americans Spend More Than Half Their Income On Rent

Tyler Durden's picture

As we wrote most recently in November, the median asking rent in the US just rose to an all time high...

... explained by the lowest US homeownership rate in nearly 20 years.

And while the charts above mean another year of record bonuses for America's largest landlord, Wall Street-based Blackstone, they also mean something else for millions of ordinary Americans: a choice, which as Bloomberg summarizes, “We either eat, or we pay rent.

Indeed, in the new normal, the recovery means an ordinary American worker either has a roof above their head, or food on the plate. The two increasingly are exclusive.

No, that's not a joke: here are the facts - an estimated 11.3 million Americans were spending more than half their income on rent in 2011, according to the Harvard analysis based on latest available Census data. That number represented a 28 percent increase from 2007.

But... but ... how is this possible? After all, the recovery, right?  Wrong.

Stagnant incomes and increased demand for cheap apartments spurred the rise. Between 2007 and 2012, real median renter incomes fell by 7.6 percent, based on Census data compiled by the Joint Center. The number of renters climbed 11 percent between 2007 and 2011, U.S. Department of Housing and Urban Development data show. A Census report released this month found that 31.6 percent of Americans lived in poverty for at least two months between 2009 and 2011, an increase from 27.1 percent over the 2005 to 2007 period.

And the nail in the coffin: the annual rate of change in real disposable income per capita just went negative.

The rest of the story is well-known. Wall Street landlords, who have access to cheap funding, demand a high cap rate, and as a result rents keep going higher and higher, and since the cost of capital is still sufficiently low to where even a less than fully rented out complex will generate a positive return, there is no impetus to lower prices in order to generate more demand (well, everywhere except perhaps in New York of all places, where rents continue to decline). Alas, for others this dynamics means being forced to move out (and not being able to squat in a house in which the mortgage has not been paid for years). Such as Hector Pinedra:

Hector Pineda spends 60 percent of his income renting a $1,500-a-month apartment for his family in Alexandria, Virginia. With housing around him slated to be torn down and replaced by pricier units, the 33-year-old cook worries his rent will go up or his building too will be demolished.


In the neighborhood where Pineda lives with his wife and their two sons, redevelopment will claim many of the area’s 2,500 affordable housing units, starting as early as this year, said Derek Hyra, an associate professor of Urban Affairs and Planning at Virginia Tech and a member of the Alexandria Planning Commission.


While the city and developers have pledged to provide 800 affordable apartments, Pineda says he expects many of his neighbors will have to move to find lower rents.


“This project is for people with money,” said Pineda. “I, working to clean homes, in a restaurant, can pay $2,000 to $3,000 for an apartment? Never.

Hector is just one of millions of Americans who are in the same boat. And what makes it worse is that any potentially affordable housing will soon blow up, literally.

The cheapest housing units across the nation are the most likely to be demolished, and new construction typically commands higher rents, according to an analysis by the Harvard Joint Center for Housing Studies. Meanwhile, foreclosures that soared after the housing bubble burst in 2007 turned thousands of former homeowners into renters, heating up competition for affordable units.

And when there is an entire group of people - read potential voters - that is increasingly angry due to the capital misallocation courtesy of the Fed, what happens? Why the government gets involved of course.

The number of households who were potentially eligible for housing assistance ballooned to 19.3 million in 2011 from 15.9 million in 2007. Meanwhile, the number of very low-income renters receiving support barely climbed, to 4.6 million from 4.4 million, the Joint Center analysis found.


Programs including the Section 8 housing choice voucher program didn’t expand in line with rising demand during the recession. The vouchers are the federal government’s main program for helping very low-income families, seniors and the disabled afford private housing and are administered by local agencies. By subsidizing rents, they can reduce payments to 30 percent of earned income.

Unfortunately, when the government gets involved, it always gets worse. And get involved even more it will. Guaranteed:

The number of renter households will increase by between 4 million and 4.7 million over the next decade, based on Joint Center projections. As baby boomers age into retirement the number of renting seniors will increase by 2.2 million, and that increase in fixed-income renters will drive up demand for assisted units.

But since the government's incursion will merely accelerate the unaffordability of prevailing housing prices, this means that America is set for the first wave of reverse migrations, away from the coastal megapolises and into the heartland, in decades: "Without a clear fix, people and businesses may leave the most expensive rental markets -- such as San Francisco, where rent appreciated 10.6 percent year-on-year in December 2013, according to data from real estate researcher Trulia Inc., based in San Francisco. They may move to places where workers can afford to live, said Mark Calabria, director of financial regulation studies at the Washington-based Cato Institute."

That, or they may just opt out for the kind of "affordable" housing they can still get Uncle Sam's loans to fund: cars.

And so, the New Normal recovery will truly be televised: from the "bedroom" on the rear seat of your government loan-purchased Chevy Tahoe.

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ZerOhead's picture

< A robust economy

< Afrobust economy


Predictions for team Obama/Yellen in 2014...

ihedgemyhedges's picture

Ahhhh, Blackstone.  They will happily structure a PIK for one of their big deals, but as a slumlord I bet you that you will not get a good response if you pay your rent as a PIK instead of $$$$$.......

TruthInSunshine's picture

Thanks, Bernanke!

Thanks, Obama! (Blackstone bankrolled Zero)

*Friendly Reminder: There are a minimum of 12 million empty/vacated, non-rented, non-occupied residential structures on and off (if underwater) bank balance sheets.

I see and know of such homes EVERYWHERE, even in "middle class" suburbs.

What a lovely equilibrium this "recovery" has, no? Nothing manipulated or artificial about it in any way...

eclectic syncretist's picture

Blackstone better have an army of top tier lawyers ready for lots of work, because once they control the housing/renting market they are going to need it.

Four chan's picture

principal writedowns are the only way out for the fed, banks, and home owners.

the0ther's picture

Given that username, spose you could get on that nasty site and convince the geek army to Fuck up that nyc principal who runs the rat infested school? Please??

Duke of Earl's picture

The slumlord's pic is worth the click-through.

cynicalskeptic's picture

NY post got in lots of trouble for their headline on his death - tasteless but priceless Post..... 


AldousHuxley's picture

The real wealthy extract rent from populace from using exclusive private ownership of real estate they control via highest power on land....the government


TruthInSunshine's picture

Blackstone is the de facto AUM of the Fed itself, so expect the U.S. Government (Congress, Treasury, Executive Branch, etc.) to do everything & anything in their powers to keep as many of those 12 million empty residences (the shadow inventory) from being listed for sale, rent or otherwise coming to market, as they have to "get to work" for their bankster masters.

A tsunami of price deflation will ensue if they don't sloooooowly trickle that stream over many, many years. Given that 1/3 of banks are insolvent but for mark-to-fantasy accounting rules already, there'd be bank blood flowing like a tidal wave.

Bankocracy USSA.

Simplifiedfrisbee's picture

This is outrageous! I have been priced out of the housing market because I have morals and will resist because I hold a small amount of virtue that allows me to stand firm on my decisions. Even if I would have bought during the onslaught of deflation from 2009-2011, I would have been surrounded by either boomers selling, FHA "owners," or rentals from blackstone.

I want to verbally defecate on hell bound Bernanke, Yellen, political sell outs, multi-national conglomerate CEOs, and their staff. Indignation is highly activating and will nurture my resistance until my passage away from this human created monstrosity of deceit and usury(aka as a neo-feudal kleptocratic corporatocracy).

Until my time arrives to leave, I will not be blinded to the truth and will form what is necessary to strive for Liberation.

666's picture

This year, Hector will no longer say, “We either eat, or we pay rent.” He and many others will instead say, “We either pay ObamaCare premiums, or we pay rent.

Harbanger's picture

The rent is never too damn low!  Occupy those vacated residences and let the gov manage housing.

OceanX's picture

"12 million empty/vacated, non-rented, non-occupied residential structures on and off (if underwater) bank balance sheets."

What do you suppose the backlash would be if the population got the idea that all of these vacant houses were used by pedophiles to commit crimes?

Years ago, the residents of Detroit burned all the vacant (crack houses) in their neighborhoods...

Kobe Beef's picture

Nah, they burned everything. Because it was Detroit, most of what they burnt was crack houses.

Mr Pink's picture

The best part is Blackstone is taking the rent money and in 2 years these properties will be stripped and abandoned. Then...wait for it...they get a bailout!

flacon's picture

...and there was much cheering and rejoicing in the land..... (crickets)....

Offthebeach's picture


Eastern Massachusetts county. 

I know a guy existing in abandoned boat in the woods. We have a couple blue tarp camps in woods that I know of, maybe more. Lots of illegal apts, the closets are turned into a micro, hotplate and sink kitchen. Bath down the hall. People living in rough finnished basements. Living in cars. Abandoned passenger rail cars. One guy lived in a uber rich guys woods. Dug a underground knoty pine mini palace so hidden the NVA would of been proud. Deer hunters found it. Lots of abandoned, forclosed houses and commercial spac.A couple of tradesmen living in industrial bays/ garages.  

A few families stopped mortgage payments years ago. Still in the house.

I have no idea of how many people live off rice and church can food, have the heat off cause they cant afford power, oil, taxes. Turn the main oil burner switch on only for a few hours.  Ditto the main electricaI  breaker

I walk for health and there are a lot of really really blackout dark houses at 7PM that I know people live there.


The important thing is to keep asset prices high. 2-3 decades and incomes should recover


401K of Dooom's picture

You live in Massachusetts?  Get out of there now!  That state is imploding slowly.  The implosion is following an exponential curve and soon it will be horrific.  Move to a part of the country that no one else wants to go to.  I'll give you a hint.  Look at your favorite apartment hunting website.  Look at other states and see what rates you can get.  That state is going to kill itself with skyrocketing property values.  It will end just like the Weimar Republic. 

10mm's picture

Everything going according to plan. A house/apt is to support shelter. Not fuckin schools, pensions, fsa.

cynicalskeptic's picture

Serfdom comes about when people trade their freedom in exchange for a place to live and a portion of the food they produce for their Lord and Master.   

We are moving back in that direction.   People willingly selling themselves into serfdom in exchange for a minimum level of shelter, food and 'protection' from the others who have nothing.

akak's picture

Good luck finding a woman that svelte and comely in a trailer park!

ZerOhead's picture

You haven't seen her toothless smile yet...

Sudden Debt's picture

oh! A proffesional cocksucker!

TheMerryPrankster's picture

Are you saying she's a banker or a politician?

bonderøven-farm ass's picture

Working girl.  Future looks bright.....

pods's picture

That is what all the beer is for!

And remember, drinking rum before 10 am doesn't make you an alcoholic, it makes you a pirate!


The Gooch's picture

Martinis before 10 makes you a CONgressman.

NotApplicable's picture

While chugging vodka all day makes you a judge.

Miffed Microbiologist's picture

Somewhat comely in a relative way. Those fake boobs look like melons on a wall. If youre going to do fake, at least make an effort to appear real. I've considered tattooing " my eyes are up here" with an arrow indicator for Mr M. who does seem to relish my natural 36D rack.


zipit's picture

Enjoy 'em while they last ('cause they are gonna become a saggy, deflated, mess with nipples sooner than you can say, "How come my guy doesn't want to play with them anymore?").

Harbanger's picture

You're a woman, so you probably know from experience that most guys that are into big boobs are lousy lovers and have mommie issues.

zipit's picture

How do you know that?  Oh, sorry :)

Miffed Microbiologist's picture

Absolutely. I'm pretty well proportioned but on a long enough timeline gravity gets us all eventually. I plan to age gracefully and enjoy what I have while I have it. This is true in all things. ;-)


akak's picture

Well, if you're anything like my grandmother, you can look forward to having a second "lap" when you sit down on which to rest your plate while eating on the couch.  At least there's that!

Harbanger's picture

In their old age, I saw nothing sexy about my grandparents, but there was a bond between them and sense of fulfillment in their eyes that I can only dream of.

Miffed Microbiologist's picture

Oh dear, that image is most disturbing! I guess I can toss them over each shoulder cross your heart style. Maybe I will add some furs and make a new fashion statement. Sorry PETA.

Of course, the way this world is going, I'm not sure of the assurance of our existence that far in the future.


cynicalskeptic's picture

Gravity can work to your advantage.  Big boobs still look prety good whatever your age when you're flat on your back.....

zipit's picture

Just wait for her shift to end at strip club... then you can find her back at the trailer park.

FredFlintstone's picture

Sounds like you have searched high and low.

Rising Sun's picture

I think I can see beef curtains...no wait...it's not....wait wait....it is!!!!  It is beef curtains!!!!

wisehiney's picture
A cockroach’s last word to a man who wanted to kill it “Go ahead and kill me, you coward. You are just jealous that I make your wife scream more than you do when I climb her!”.
PTR's picture

How fitting.  The image is from COD: MODERN WARFARE 3 "TRAILER PARK" MAP.  So you'll have your armed thugs as well.

Peter Pan's picture

I am not by any means trying to side with the Blackstones of this world, but does anyone know to what extent rent increases have been driven by property tax increases?

It is however a general theme in other countries as well, where the cost to buy or rent the lower end of the market moves much faster than just about any other segment. This of course is the result of people being increaingly priced out of the market.