There’s an old debate that if America’s renters budgeted better then they could afford better housing. This argument is easy enough to shut down. Rent inflation is expected to increase from 1.9 percent in June 2021 to 6.9 percent at year-end 2023, the highest it's been in thirty years. Meanwhile, most full-time minimum wage workers already can’t afford a two-bedroom apartment.
It’s too simple, and too cruel, to blame housing in-affordability on renters being unable to budget and overspending when in fact, 46% of renters spend more than 30% of their income on rent leaving them very little money to actually have a budget at all.
As of 2021, Rhino has saved renters nearly $500 million in cash with our security deposit insurance that’s offered in over 1.5 million homes in America. This money not only helps renters better support themselves, but also has made a huge impact on the American economy. We partnered with FTI Consulting, one of the top global management consulting firms, to create a report that puts this number in perspective: What difference does $500 million make for renters, not just their bank accounts, but America’s entire ecosystem?
Some of the reported statistics from The Economic Impact of Rhino Report were surprising and some less surprising. The report reveals what American renters need, but also how they spend their money and how it creates a positive ripple effect on their communities.
6,600 jobs created across all industries
$635 million expansion of the U.S. GDP
$1.2 Trillion increase in U.S. output
All because the low-income renters who saved $500 million spent more money on necessities such as retail products or personal services like preventative healthcare.
A quick note: FTI Consulting uses an IMPLAN tool to measure the impact of this ripple effect, which occurs when you assess the direct, indirect, induced, and total impact of consumer spending on a community, including how this spending benefits employment, business sales, GDP, income, and state and federal tax revenues. While it’s complex, all these things matter when considering the full economic impact of $500 million dollars saved and used on other things instead of a security deposit.
When renters have more cash on hand, the cycle of spending too much on rent and having little money for anything else is broken, which means more money gets cycled back into the economy, supporting industry growth, production, tax revenue, and nearly every aspect of the American renter’s life.
When you zero in on the industries that renters are supporting with income elasticity, it's revealed that they are not over-spending, but instead using money on what they absolutely need. Interestingly enough, healthcare was an industry that highly benefited from renters having more money to spend, because low-income households, primarily in states such as New York and Texas, spent more money on additional tests and screenings when they had more flexible cash.
What I found most intriguing about the analysis is its emphasis on why the healthcare industry (particularly employment in the healthcare industry) benefits so much from renters using their money for more preventative care.
The more access renters have to healthcare, the more it directly benefits our local economies because healthcare is “labor-intensive,” requiring a ton of local healthcare workers, and a lot of its services and products are provided locally. That’s a direct benefit for a community of any size. It's not only an interesting case to present in favor of using security deposit insurance, but also in lowering rent nationwide and increasing overall access to healthcare in our communities.
Overall, the report illuminates that $500 million saved for renters has bolstered employment, our economy, labor income, and tax revenue. Beyond that, renters are getting more access to essential services that can improve their health and quality of life, and that with extra cash, their buying power makes a big impact.
If you want to learn more about the “The Economic Impact of Rhino” report, read our press release.