Rental prices have increased dramatically in the last four decades. Since 1985, rental growth has outpaced inflation by 40% and income by 7%, according to a new study from the Real Estate Witch.
While rental prices have been rising steadily, wage growth has been more volatile. Since 2011, revenue has increased by about 4% each year. However, if adjusted for inflation, it grows only 2% each year, according to the Real Estate Witch studio . As rental prices rise, the purchasing power of the average American worker erodes.
Rent prices remain stubbornly high as there is a surge of renters who want their own place to live. The COVID-19 pandemic dramatically accelerated the shift towards solitary living, but the construction of houses and apartments new never really recovered from the 2008 financial crisis, and inventory remains incredibly low today.
When you combine a limited resource like housing with widespread and growing income inequality, the rich they are the ones who set the price,” said Ezra Glenn, a professor in the Department of Planning and Urban Studies at the Massachusetts Institute of Technology. "The poor end up having to pay more than their income or be pushed out entirely, as we are all competing in these same limited markets."
In a country where rent has largely exceeded income, the median rent-to-income ratio has become much less favorable for the tenants . From 2009 to 2021, the rent-to-income ratio increased in 46 of the 50 most populous US metropolitan areas.
Rental prices have grown 42% in the US since 2009
From 2009 to 2021, the last full year for which data is available, median rent in the US increased 42%, from $817 per month to $1,163. In high-demand rental markets, the rent increased even more.
In half of the 50 most populous US metropolitan areas, rent increased by more than 42%. In seven cities, it increased by more than 60%.
- San Jose, Calif. (85%)
- Denver, Colorado (82%)
- Seattle, Wash. (81%)
- Portland, Oregon (72%)
- San Francisco, Calif. (71%)
- Nashville, Tennessee (62%)
- Austin, Texas (60%)
In San Jose, rent increased from $1,360 a month to $2,511. That's an 85% increase in just 12 years, which equates to about 7% growth each year.
As extreme as San Jose's rent increase may seem, some cities may be on their way to exceeding it. In six US cities, rent increased 9% or more between 2022 and 2023.
- Louisville, Kentucky (10%)
- Cincinnati, Ohio (9.9%)
- Indianapolis, Indiana (9.8%)
- Miami, Florida (9.6%)
- Buffalo, New York (9.1%)
- Kansas City, Missouri (9%)
Rent has grown faster than income in 92% of the largest US metropolitan areas.
In a textbook definition of inflation, wages should rise along with prices. But that's not what American workers have experienced. The crisis affordable housing in the US it exists because in 46 of the 50 most populous metropolitan areas, rent growth has outpaced income growth.
one of the markets real estate The most popular is Denver, where rent exceeded income by a staggering 71%, the highest percentage among the 50 cities studied. Denver isn't the only city where the gap between rent and income is growing rapidly. In seven cities, rent exceeded income by more than 50%.
- Denver, Colorado (71%)
- Las Vegas, Nevada (57%)
- Charlotte, North Carolina (56%)
- Seattle, Wash. (55%)
- Atlanta, Georgia (53%)
- Portland, Oregon (51%)
- Nashville, Tennessee (51%)
Since 2009, income growth has outpaced rental growth in only four US cities: Providence, Rhode Island; Buffalo, New York; cleveland; and Pittsburgh.
Those cities remain bastions of affordability, in part, because they have experienced lower population growth than other cities where rent has risen sharply. From 2009 to 2021, the population did not grow more than 1,500% in any of those four cities. By contrast, the population grew by at least 1,500% in the seven cities where rent exceeded income by more than 50% between 2009 and 2021.
However, if renters start flocking to affordable cities because of their low prices, the increased demand is likely to cause rents to rise.
The most and least affordable cities for renters
Financial experts suggest paying no more than 30% of gross monthly income on housing. On average, Americans spend around 20% of their monthly salary on rent.
Miami renters have the highest rent-to-income ratio, spending 28.5% of their monthly income on rent. Miami residents are pressured from both sides by high rents and low wages. Her monthly payment of $1,492 is 28% higher than the national median rental price, while her annual income of $62,870 is 9% less than the US median income.
Cincinnati renters, on the other hand, have it just fine, spending just 15.5% of their monthly income on rent. Better yet, Cincinnati renters earn $70,308, 2% more than the national median income, and pay just $906 a month in rent, 22% less than the national average.
Behind Cincinnati, Pittsburgh, St. Louis, Minneapolis and Buffalo, New York are the most affordable cities for renters, with a rent-to-income ratio of less than 17%.