What's Happening?
In response to rising housing costs, many renters in the U.S. are turning to 'rent now, pay later' services to manage their monthly payments. These services, such as Flex and Livble, allow renters to split their rent into multiple payments throughout
the month. Flex charges a monthly subscription fee and a percentage of the rent, which can lead to significant additional costs. Kellen Johnson, a user of Flex, paid over $33 monthly for the service. These services are particularly appealing to lower-income renters and gig-economy workers with unpredictable incomes. However, consumer advocates warn that these services often function like short-term loans, with high effective interest rates that can exacerbate financial strain.
Why It's Important?
The increasing use of 'rent now, pay later' services highlights the financial challenges faced by many renters in the U.S., where housing costs have risen significantly. With approximately 42.5 million households renting, many are considered 'cost burdened,' spending 30% or more of their income on rent. These services offer a temporary solution by providing cash flow flexibility, but the associated fees can add to the financial burden. The trend underscores the broader issue of housing affordability and the need for sustainable financial solutions for renters. As these services become more popular, there is a risk that they could lead to higher rents if landlords factor in renters' ability to pay in installments.
What's Next?
As the popularity of 'rent now, pay later' services grows, there may be increased scrutiny from consumer protection agencies regarding their fee structures and impact on renters' financial health. Companies like Affirm are exploring similar models, potentially expanding the market. However, the fundamental issue of housing affordability remains unaddressed. Policymakers and housing advocates may push for more comprehensive solutions to support renters, such as affordable housing initiatives or rent control measures. Additionally, there could be a push for greater transparency and regulation of these financial products to protect consumers from predatory practices.
