According to U.S. Census Bureau 2017-2021 data, more than 35% of American households rent their homes. It’s also more costly than ever to rent.
Rent prices are high due to a number of factors.
Inflation. Renters pay more for higher rents because landlords have to pass on rising costs (such as rising wages or repair costs) to tenants. Inflation is caused by higher rent costs.
Inventory shortage. A shortage of rental properties is common, especially those that are affordable.
Expired rent freezes, discounts
Shifting workforce. The popularity of remote work increased, and deep-pocketed renters sought bigger homes in low-cost areas. This migration resulted in a net increase of rents in suburban areas, even though it increased them more in urban areas.
There is more demand for single-person living. According to StreetEasy’s November 2022 report, prospective renters are looking for one- and studio-bedroom apartments. This is driving up the demand for housing.
There are many barriers to homeownership. Prospective homeowners stay renters longer because of high demand for existing homes and low inventory, rising mortgage rates and supply chain disruptions, which have made it more costly and more difficult to build new homes.
The rise in mortgage rates over the last year has caused housing prices to cool faster than rents. Rents are increasing at a slower rate than 2021 but more quickly than before the pandemic.
A promising trend began in 2022: According to RentCafe, multifamily construction reached a national high of 50 years. Rent costs could be reduced if there is a new supply of housing. New construction can also mean affordable housing, as many cities require inclusionary housing. However, the rise in interest rates has caused construction to slow down, which could lead to delays in new rental projects.
The Biden administration presented a “Blueprint to a Renters Bill of Rights” on Jan. 25. This new set of federal actions was aimed at increasing rental affordability and includes guidelines for strengthening tenant protections.
Is the rent going up/down?
According to Zillow’s December 2022 rental report, the price of asking rents dropped 0.3% between November and December. Overall, rent growth has been slowing after its peak of 17.1% year-overyear growth in February 2022. These are the most recent increases and decreases from Zillow’s analysis of housing data.
Cities with highest rent increases
Sacramento, Calif. (+2.7%).
Providence, R.I. (+0.6%).
Charlotte, N.C. (+0.1%).
Louisville, Ky. (+10.4%).
Providence, R.I. (+9.7%).
New York (+9.6%).
Cities with lowest rent increases
Las Vegas (-0.9%).
San Jose (-0.8%).
Washington, D.C. (-0.8%).
Las Vegas (-0.9%).
New Orleans (+2.2%).
Austin, Texas (+3.9%).
Inflation vs. Rent
Inflation is a significant contributor to rent, and rent costs are also affected by it. Rent, which is a component of the price index for shelter, accounts for 30% of the consumer price index. This index can be used as a proxy for inflation.
There is also a delay in how rent data is reflected into the CPI. This means that we won’t be able to see housing for the majority of 2022 until the end of 2023. This is due to the cycle for renewals of leases. Renters will pay the same costs for the entire year because most leases last about a year. Only after the lease ends, can you get a better idea of the rental market.
Since decades, CPI’s rent-specific component has outpaced overall inflation. It began to diverge sharply in the mid-to late 2010s.
Who are the most likely to rent?
According to Harvard University’s 2022 rental housing report, singles are more likely than couples to rent, regardless of whether or not they have children. Hispanic, Black, and Asian residents are more likely than white residents to rent homes. Renting is more common for those with incomes below $74,999 than for those who earn $75,000 or more.
Even with rising rents, renting is still cheaper than buying. Renting a three-bedroom apartment in an average U.S. county is still cheaper than buying a home of similar size in 95% the 222 counties analyzed by ATTOM in its 2023 Rental Affordability report.
Rent vs. Income
According to the NYU Furman Center, households should not spend more than 30% of their gross annual income on rent.
This means that if a household has a median income of $67,521 per year, which is $5,627 per monthly, then the goal would be to rent no more than $1688 per month.
A household that spends 30% of its income on rent is considered “moderately rent-burdened”. However, a household that spends 50% or more is considered “severely rent-burdened” under federal standards. According to a Zillow analysis of U.S. Census Bureau data from 2015, seniors, immigrants, and racial/ethnic minorities have the highest rent burdens. Renters with severe rent burdens are more likely to commute by public transit for long distances and not own cars. High rent burden homes often have children.
NerdWallet’s analysis of rent to income ratio by metro area found that 61% of US market rents in December 2022 had rent-to–income ratios equal to or higher than the 30% recommended. This means that typical rents in 61% of U.S. cities are likely to be burdensome.
Top 10 most affordable cities by rent to income ratio
Top 10 Most Affordable Cities by Rent-to-Income Ratio
Find out the cost of living in your city. Look for the nearest metro area if your city isn’t on the list.
National vacant rates: Homeowner vs. rent
While the rental vacancy rate for the third quarter (2022) was similar to last year (5.8%), it was slightly higher than that of the 2022 second quarter (5.6%).
In the meantime, homeownership rose by 0.6 percentage points (65.4%)
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).