A staggering 61% of American renters are now unable to afford the median rent rate, as inflation continues to erode earnings and affordable housing remains scarce.
This sobering statistic from a recent Redfin report highlights a deepening affordability crisis in the housing market, affecting millions across the nation.
“Only 39% of renters make enough to afford the median-priced apartment,” notes the Redfin report, emphasizing the growing disparity between income and housing costs.
Renters now need to earn an additional $11,000 annually to afford a typical apartment in major U.S. cities. This shortfall is the most significant since October 2022 and reflects a broader economic trend where rental costs are rising faster than incomes.
The least affordable cities for renters are New York City, Miami, Boston, Los Angeles, and Riverside, California. Renters in these metropolitan areas earn roughly 40% less than what is needed for a typical apartment.
Redfin’s report underscores the severity of the situation, stating, “New York is perennially one of the most expensive rental markets, but affordability challenges have been intensifying; rents rose 9.2% from a year earlier in May—one of the biggest increases in the nation.”
Contrastingly, in cities like Austin, Dallas, Houston, Phoenix, and Washington, D.C., rental prices have remained within reach for the average earner.
The housing affordability crisis also affects prospective homeowners. A Zillow analysis found that individuals in 2024 need to earn 80% more compared to 2020 to afford a home.
Contributing to the scarcity of available homes is the “lock-in” effect, where homeowners with low-interest mortgages are disinclined to sell in a high-rate environment, further reducing market inventory.
Harvard’s “State of the Nation’s Housing 2024” report aligns with these findings, revealing that rents have escalated by 26% nationally since early 2020, significantly outpacing income growth.
This has led to a record number of 22.4 million renter households being cost-burdened in 2022—defined as spending more than 30% of their income on housing and utilities.
The Harvard report states, “Both homeowners and renters are struggling with high housing costs. On the for-sale side, millions of potential homebuyers have been priced out of the market by elevated home prices and interest rates. Homeowner cost burdens are also on the rise, driven by growing taxes and insurance costs. For renters, the number with cost burdens has hit an all-time high as rents have escalated.”
The gap between housing costs and incomes is widening, signaling an ongoing affordability crisis in the U.S. residential market.
As rents and home prices continue to climb, the need for effective policy measures to combat this trend becomes increasingly urgent, posing challenges for current and future generations seeking stable and affordable housing.