The rule of thumb states that rent should not exceed 30% of a household’s gross income. This means that most cities in the United States are out of reach.
In January, 64% rents in the US were at or above the 30% recommended rent-to-income ratio.
That means market rents are moderately-to-severely burdensome for residents in 64% of U.S. cities measured. Zillow provides market rent data. Data from the U.S. Census Bureau for 2021 is used to calculate median income. This data does not distinguish between incomes of residents who live in these cities and those who rent.
Federal standards dictate that a household must spend between 30% and 49% of its income on rent to be considered “moderately rent- burdened.” A household spending more than 50% means the household is “severely renting burdened,” according NYU Furman Center research. This center conducts research on housing and urban policy.
Five of the 225 cities that were analyzed have rent-to income ratios that place renters with median incomes within the “severely rental burdened” category as of January 2023.
Bridgeport, Connecticut: 69%
Trenton, New Jersey: 68%
Santa Maria California: 61%
New York City: 54%
The most financially burdened people in housing are seniors, low-income households and immigrants according to a 2015 Zillow analysis based on U.S Census Bureau data.
These are the most affordable and least expensive rental housing markets according to Zillow’s January 2023 rental market data.
Are rents rising or falling?
The price of advertised rents dropped by 0.1% between December 2022 and January 2023 according to Zillow’s January 2023 rental report
Since Zillow started tracking rent in 2016, the annual growth reached 17%. It has slowly declined since then. Louisville, Kentucky had a 10.1% increase in rent in January compared to January 2022. The only city with a decrease in rent was Las Vegas, which fell 1% in January over the same month last years.
Rent is one of many factors that contributes to the measurement of inflation. Shelter (which includes rent) is responsible for 34 percent of the consumer price index, an indicator of inflation.
Current inflation is not necessarily indicative of current market conditions due to the delay in reporting rent data. This is due to the long cycle of lease renewals that lasts around one year.
Despite this lag, rent-specific inflation, or CPI for short, has outpaced general inflation for decades.
Methodology: Rent-to-income ratios by metro area
NerdWallet gathered the most current market rental data from 495 cities in the Zillow Observed Rent Index. It then matched that data with the U.S. Census Bureau’s most recent median household income data (2021). Some cities that were identified in the Zillow Observed Rent Index didn’t make it onto the U.S. Census Bureau’s list of median household incomes per city. They weren’t therefore included in this analysis. Both sets of data identified 225 cities. NerdWallet then calculated the rent-to income ratio using the following formula. Market rent/(median rental/12 months).