Some people who live in predominantly Latino and Black areas of East Austin spend upwards of 60% of their income on rent, per a new housing report.
Why it matters: The statistic is another window into the Austin housing crisis, as soaring rents and home values push residents, especially those working marginal-income service industry jobs, to the city’s periphery.
- Financial advisers generally recommend spending no more than a third of income on housing, but soaring property values have led to a domino effect of higher property taxes and higher rent.
- “When you see a metric like that, at first glance it doesn’t make sense,” Shri Ganeshram, CEO of Awning.com, which put together the report, tells Axios.
- Super high rent in relation to income is a telltale sign of deep change, as older houses get flipped or torn down for much bigger ones.
- “When I drive around East Austin, I see older construction right next to brand new houses, sometimes three times as big,” Ganeshram said.
How they did it: Researchers at Awning.com, a real estate investment firm, looked at income and housing listing data in more than 75 ZIP codes around the Austin area.
What they found: Rents for two- and three-bedroom homes have increased as much as 25% compared to pre-pandemic rates.
- And people are willing to pay twice as much more for an extra bedroom, from $125 pre-pandemic to $275 per month today.
- “Is this the home office tax, and if it is, should employers be paying it?” the report authors write.
Of note: Austin officials are trying to come up with ways to ease the housing crunch — relaxing rules on the construction of garage apartments, for instance — but market forces are working against them.
The big picture: Rents — and investment opportunities — are going up in places like Liberty Hill, Buda and Leander, spots within commuting distance of Austin.
- “If you’re betting that housing supply will not keep up with 25%+ population growth in these areas, homes will appreciate quickly,” per the report.
The best places to invest, for those with extra cash on hand, are farther outside of town: Think Killeen, Temple and even Waco.
- You can still find three-bedroom homes under $200,000 and a potential rental yield over 8.5%.
- Rental yield is generally defined as rental income divided by the price of the home.