January Rent Data: 64% of US Cities Fail Affordability Test

If you follow the rule of thumb that households should spend no more than 30% of gross income on rent, then most American cities are unaffordable.

A monthly NerdWallet rent-to-income ratio analysis of 225 cities in the United States reveals that in January, 64% of market rents are at or above the recommended 30% ratio.

That means market rents are moderately to severely burdensome for residents of 64% of measured U.S. cities. Market rent is from real estate website Zillow, and the median income used for this analysis is from 2021 U.S. Census Bureau data. The data does not distinguish between the incomes of residents who own rather than rent in these cities. .

By federal standards, spending 30% to 49% of income on rent means a household is “moderately charged with rent,” and spending 50% or more means a household is “severely charged with rent,” according to the NYU Furman Center, which conducts research. on housing and urban policy.

Of the 225 cities analyzed, five have rent-to-income ratios that place tenants with median incomes in the “rent-heavy” category for January 2023, including:

  • Bridgeport, Connecticut: 69%

  • Santa Maria, California: 61%

According to a 2015 Zillow analysis of US Census Bureau data, renters who bear the greatest financial burden for housing tend to be seniors, low-income households, immigrants, and racial or ethnic minorities.

Here are the cities with the cheapest and most affordable rental housing markets, according to January 2023 rental market data from Zillow.

Are rents going up or down?

From December 2022 to January 2023, the price of advertised rents fell by less than 0.1%, according to Zillow’s rental report for January 2023.

Annual rent growth peaked at 17% in February 2022 since Zillow started tracking it in 2016 and has been slowly declining since. The city with the largest annual rent increase in January was Louisville, Kentucky, with a 10.1% increase from January 2022. Las Vegas was the only city measured with a drop in rent – ​​down 1% in January compared to the same month last year.

Rent is one of the biggest contributors to how inflation is measured. Housing, which includes rent, accounts for the largest portion (34%) of the consumer price index, an indicator of inflation.

But current inflation does not necessarily reflect current market conditions, due to the lag in the way rental data is reported. This is due to the lease renewal cycle, most of which last about a year.

Even with this lag, the rent-specific portion of the consumer price index, or CPI, has outpaced headline inflation for decades.

Methodology: rent-to-income ratios by metropolitan area

NerdWallet pulled the most recent market rental data available for 495 cities from Zillow’s Observed Rent Index and compared it to the most recent data available on median household income (2021) for cities by the US Census Bureau. Some cities identified in Zillow’s Observed Rent Index were not included in the US Census Bureau’s list of median household incomes by city and therefore were not included in this analysis. A total of 225 cities were identified by the two datasets. Next, NerdWallet calculated the rent-to-income ratio using the following formula: Market rent/(median rent/12 months).

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