ST. LOUIS–A new analysis shows in which U.S. cities it is most expensive and least expensive to rent based on the rent-to-income ratio.
According to Real Estate Witch, which conducted the analysis, residents in Miami spend 28.5% of their monthly income on rent, compared to 15.5% in Cincinnati, the most affordable place to rent.
As most renters are acutely aware, rent prices have grown faster than inflation and income over the past four decades.
“Since 1985, rent has increased 208%, while inflation has climbed 149%. If rent prices grew at the same rate as inflation, the median U.S. rent would cost 19% less — just $939 a month instead of $1,163,” Real Estate Witch said in its study. “Rent price growth first exceeded inflation in 2001, when a short recession squashed demand and lowered the inflation rate. The gap widened again during the Great Recession of 2008, and a decade of underbuilding spawned today’s affordable housing crisis.”
According to Real Estate Witch, the U.S. is short about 600,000 rental units and needs to build 4.3 million more to meet demand by 2035. While inventory remains low, fierce demand for housing will likely keep rent prices elevated for struggling tenants.
Lagging Wages
“Americans’ annual income has leapt 194% since 1985, but wages still lag behind rent growth by 7%,” Real Estate Witch noted. “What’s more, dramatic shifts in the labor market have caused wages to grow inconsistently. Since 1985, wages have increased at an average rate of 5.4% per year, but since 2011, growth has slowed to 4.2% per year on average. If adjusted for inflation, income has grown just 18% in the past decade — about 2% each year — making it difficult for Americans to afford skyrocketing rent.”
To determine how rent, income, and inflation impact American tenants, Real Estate Witch said it analyzed publicly available data from the U.S. Census Bureau, the Federal Reserve Bank of St. Louis, and the Consumer Price Index.
The Findings
Among the findings:
- From 1985 to 2021, rent prices have exceeded inflation by 40% and income by 7%.
- The monthly median rent price in the U.S. jumped from $378 in 1985 to $1,163 in 2021 — a 208% increase.
- From 2009 to 2021, the median monthly rent price in the U.S. climbed 42% from $817 to $1,163.
- If rent prices grew at the same rate as inflation since 1985, the median rent would cost 19% less — just $939 a month instead of $1,163.
- From 2009 to 2021, rent outpaced income growth in 46 of the 50 most-populous metros.
- Rent exceeded income by the largest margin in Denver (71%) and the smallest margin in Milwaukee (5.2%).
- Rent eclipsed income most frequently in high-demand markets.
- In Charlotte, where rent outpaced income at the third-highest rate, the population has grown 2,446% since 2009 — the most of any city Real Estate Witch said it studied.
- Since 2009, income has exceeded rent in only four cities: Providence, Rhode Island; Buffalo, New York; Cleveland; and Pittsburgh. These four cities are also the only metros where the rent-to-income ratio declined from 2009 to 2021.
- The median rent-to-income ratio across all U.S. cities is 20%, but the ratio in 21 of the 50 most-populous cities exceeds the national median.
- The rent-to-income ratio increased in 46 out of 50 metro areas from 2009 to 2021. In 33 of those metros, the ratio climbed higher than 5.8% — the median increase across all U.S. cities.
- The rent-to-income ratio increased the most in Denver, growing 24% in just 12 years, while it decreased the most in Providence, dipping 4.4%.
The Biggest Increases
According to Real Estate Witch, rent increased by at least 60% in seven U.S. cities in this 12-year span:
- San Jose, CA (85%)
- Denver, CO (82%)
- Seattle, WA (81%)
- Portland, OR (72%)
- San Francisco, CA (71%)
- Nashville, TN (62%)
- Austin, TX (60%)
For the full study results, go here.
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