The effort to pay for housing is doubled in rent: for two out of every five tenants it accounts for more than 40% of their income

The effort to access housing has become tougher in recent years, but it has not affected all pockets equally. This is confirmed by the Bank of Spain, which this Tuesday published the housing chapter of its 2023 Annual Report, in which it points out that the proportion of households that dedicate a portion of their income above that recommended to paying for housing It is especially high among families who live in rent: two out of five allocate more than 40% of their income to the monthly payment. “Households with lower incomes, which cannot access home ownership, face a high rental cost which, in part, is explained by the problems in the functioning of this market,” the analysis states.

The average proportion of income necessary to pay the monthly mortgage payment has grown 8 percentage points in the last two years to reach almost 40% of the gross disposable income of households, the highest level since 2011. Although the recovery of per capita income has served as a counterweight, this hardening of the effort has been fundamentally due to the increase in interest rates by the European Central Bank (ECB), which has made a dent above all in the pockets of the mortgaged. with variable rate loans.

Faced with this increase in the effort required month by month to pay the mortgage, the proportion of income required to pay the rent has decreased slightly in the last decade from 25.5% of the gross income of the average tenant household in 2011 up to 22.5% in 2022 -latest data available-. Although this percentage is lower than the average allocated to paying the mortgage, the effort is intensified in the case of renting among the lowest incomes, those who precisely do not have the option of accessing the purchase of a home due to their low income and their low savings capacity. Specifically, households with a lower level of income spend an average of 45% of their income paying rent.

Given that these families are forced to resort to the rental market, the proportion of households that dedicate a portion of their income above the recommended amount to paying for housing skyrockets in rentals compared to property ownership.. The Bank of Spain reminds that the probability of non-payment increases when the maximum recommended threshold of 35% of the income is exceeded. However, data indicate that in Spain two out of every five tenants exceed this threshold and dedicate more than 40% of their income to rent. In the case of those with mortgages, only one in thirty exceeds that limit. “This fact would reflect, at least in part, the appropriate selection made by banks, which condition financing to households on the availability of sufficient savings and level of income,” the report explains.

“The overload of spending on housing is concentrated in the rental market, where the worst situation in Spain stands out among the large European economies,” emphasizes the document published this Tuesday in the monographic chapter on the real estate market.. “The problems of overexertion associated with spending on rental housing can be observed in the main European economies, although in Spain these problems are especially intense among households with lower incomes,” he adds, pointing out that the proportion of 40% of households Tenants who are in a situation of overexertion in Spain double the EU average. In France this figure is aligned with the European average, while in Germany and Italy it is 15% and 25% respectively.

Within the rental market, the situation worsens even more in city centers, as well as in certain autonomous communities that are especially stressed.. Specifically, rental spending exceeds 40% of net income for more than 50% of renter households in the urban centers of the Community of Madrid, Andalusia, the Balearic Islands and Catalonia.. On the outskirts of cities, 35% of families who live in rent are in this situation, while the proportion drops to 30% among residents outside these urban centers.

No other alternative

In this way, the rental market represents for many households a suffocating scenario in economic terms, but from which the vast majority has no possible escape.. The Bank of Spain report recalls that the low savings capacity and low income of families who live in rentals make it difficult for them to access a home they own.. According to the latest data available from the INE and the Tax Agency, 61% of households that lived in a rented or transferred apartment did not have the necessary savings to purchase a house in the same municipality in 2021, taking into account both the entry and the expenses and taxes associated with the purchase.

Among those who did have income to cover the initial disbursement, 40.5% would be left with a mortgage payment higher than the maximum recommended threshold of 35% of the income.. Based on these data, the Bank of Spain estimates that in 2023, 82.5% of rental households would have difficulties accessing a mortgage loan with which to finance the purchase of a home, a proportion that would have grown regarding 2021.

Furthermore, this difficulty in accessing purchases is especially focused on groups such as young people, whose age of emancipation is increasingly later.. The Bank of Spain recalls that 65.9% of people between 18 and 34 years old still lived with their parents in 2022, a high percentage that it raises as “an indication of the growing problems of access to housing, whether rented or in property, of a group that also has worse conditions in the labor market”.

Not in vain, the unemployment rate and the partiality rate of the population between 15 and 29 years old not only double that of the rest of the age ranges (21.3% and 25.3% respectively compared to 12.1% and 13.3% in society as a whole), but also young people have suffered a significant loss of purchasing power: the gross salary of workers under 35 years of age has grown by 25% between 2015 and 2022, while prices housing costs have increased by 42% and the average cost of rent has increased by 28.5%. These circumstances have pushed many young people into the rental market, with the consequent exposure to higher rates of overexertion when it comes to paying for housing.