The average American renter is cost-burdened like never before.
The typical renter is paying 30 percent of their median income for an average rent, according to a fourth-quarter housing affordability report from Moody’s Analytics. In more than 20 years of tracking, that’s the highest average rent-to-income ratio recorded.
The 30 percent figure is significant. That’s the threshold for how the Department of Housing and Urban Development defines a family that’s rent-burdened, signifying challenges in affordable needs beyond housing, such as food, clothing, transportation and medical care.
The rental market has surged during the pandemic. The spike in housing prices was eventually coupled with rising mortgage rates, forcing many buyers away from home purchases and positioning them to become renters. Meanwhile, inflation has boosted the prices of everything, but wage growth hasn’t kept up. Additionally, COVID discounts have disappeared for many.
Year-over-year, the average rent-to-income ratio increased 1.5 percentage points. But rental costs have been on an upwards trajectory — albeit a slimmer one — for years.
When Moody’s first tracked rent-to-income ratio in 1999, the typical ratio was 22.5 percent. More recently, the ratio clocked in at 27.2 percent in 2019, 25.7 percent in 2020 (likely due to the start of the pandemic) and 28.5 percent in 2021.
There are only three states that hit the 30 percent threshold in the fourth quarter: Massachusetts, Florida and New York.
But location is everything in real estate and some metros had more suffering renters than others. New York City easily had the most rent-burdened tenants, since the city had a rent-to-income ratio of 68.5 percent. Other major metros to see high ratios include Miami (41.6 percent), Los Angeles (35.6 percent) and San Francisco, which was a couple of tenths of a percentage point away from hitting 30 percent.
There have been signs of a slowing rental market in recent months.
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— Holden Walter-Warner