Many Americans spend more than they can afford on rent, report shows
While inflation has begun to ease slightly, one area continues to become less affordable for Americans – paying the rent, as many Americans spend more than they can afford on rent. The Realtor.com® February Rental Report found that despite a slight decrease in rent prices, affordability continued to get worse in 26 major metros.
In February, the median rent in the 50 largest metros declined to $1,716, down $1 from last month and $48 from the peak. However, rents are still up 3.1% from one year ago, making rental payments less affordable. Renters earning the typical household income devoted 25.3% of their income to lease a typical for-rent home, up from 24.8% a year ago.
"The general rule of thumb is that you shouldn't spend more than 30% of your income on housing, but the data shows that in eight of the 50 largest metros, many renters are doing just that," said Realtor.com® Chief Economist Danielle Hale. "Slowing rental price growth is a positive for renters, but it's important to put this in context. This means that affordability is worsening at a slower pace in many markets; it's not getting better."
In Phoenix-Mesa-Scottsdale, Ariz., median rent stands at $1,571, which represent 24.1 % of renters' income in February 2023, down from 25.7 % in February 2022.
The pace of rent growth has slowed for the past 13 months and experienced single-digit growth for the past seven months. Despite this, rent prices are still $296 (20.8%) higher than the same time in 2020 (pre-pandemic).
Least affordable rental markets in Feb. 2023:
1. Miami-Fort Lauderdale-West Palm Beach, Fla. – $2,349 or 42.3% of income
2. Los Angeles-Long Beach-Anaheim, Calif. – $2,864 or 39.2% of income
3. New York-Newark-Jersey City, N.Y.-N.J.-Pa. – $2,895 or 37.5% of income
4. San Diego-Carlsbad, Calif. – $2,844 or 36.6% of income
5. Riverside-San Bernardino-Ontario, Calif. – $2,145 or 32.5% of income
6. Boston-Cambridge-Newton, Mass.-N.H. – $2,829 or 32.0% of income
7. Orlando-Kissimmee-Sanford, Fla. – $1,769 or 31.1% of income
8. Tampa-St. Petersburg-Clearwater, Fla. – $1,691 or 31.1% of income
Head inland to find affordability
All eight of the most rent-burdened metros are located along the coast with Fla. (three markets) and Calif. (three markets) leading the pack. On the other hand, the American Heartland led the way in terms of affordability. Oklahoma City, Okla. was the most affordable rental market in February with residents paying 17.4% of income on rent, followed by Columbus, Ohio (18.2%), Minneapolis, Minn. (19.0%), Cincinnati, Ohio (19.4%), and Kansas City, Mo. (19.8%).
"While these American Heartland markets still offer relative affordability, they are not immune to price hikes. As we saw in the January Rental Report, these markets are experiencing some of the fastest year-over-year price growth in the country," said Hannah Jones, economic research analyst, Realtor.com®. "Before signing a lease, it's important to take a good look at your monthly income and expenses and make sure that the payments won't stretch your budget too much."