Moody's Analytics: Spending 30% of Income on Rent Is the New Normal in Many US Metros
May 16 2023 - 08:30AM
Business Wire
Cost-of-living concerns are top of mind amongst Americans while
rent-to-income ratios (RTI) remained elevated in Q1, according to
Moody’s Analytics US State of Rent Burden report and data
interactive tool. While seasonal slowness and rising multifamily
inventory moderated rent growth, the number of US primary metros
still experiencing higher rent burdens plummeted from 49 metros
down to only five, a 91% drop from Q4 2022 to Q1 2023. RTI – the
percentage of gross income a median-income tenant pays for the
average monthly rent – finally cooled after more than three years
of steepening rates nationwide.
“The fever is finally breaking. Since Q4 2019, 82% of metros had
higher rent-burdens compared to pre-COVID because rent
disproportionately rose faster than incomes,” wrote Lu Chen, Senior
Economist, and Mary Le, Economist, Moody’s Analytics. “Rising
mortgage rates caused many households to be priced out from
homebuying and would-be buyers to remain renters. Apartment demand
surged as a result and drove rates sky high. The vast majority
(91%) of all metros finally caught a break from growing rent
burdens in Q1, as rent growth moderated or even declined given
affordability pressures and slowing migration. However, we are not
quite at an inflection point yet.”
Even with this near-term relief, the cost of shelter remains
significantly elevated relative to wages when compared to past
decades. In 1999, just one metro was rent-burdened: New York City,
with the median NYC household allocating 53.5% of their income to
the average-priced apartment. Today, seven US metros fall within
this designation: NYC (now 66.9% RTI), Miami (42%), Fort Lauderdale
(36.8%), Los Angeles (34.7%), Palm Beach (34.2%), Northern New
Jersey (33%), and Boston (32.8%).
COVID-19 only exacerbated this issue. NYC’s RTI increased 8.4%
between Q4 2019 and Q1 2023. Many metros followed suit, forcing
several to become “rent-burdened”, meaning the typical household
pays 30% or more of their income to rent. In Q4 2022, the US became
“rent-burdened” nationwide for the first time in nearly 25 years of
Moody’s Analytics tracking history.
“As wage growth trails behind the cost of shelter, Americans are
feeling financially distressed,” continued Chen and Le. “With rent
growth projected to hover around 2% annually, national RTI will
stay mostly flat for the year (29.7%). That is still uncomfortably
elevated and only trailing behind last year’s broken record.”
About Moody’s Analytics
Moody’s Analytics provides financial intelligence and analytical
tools to help business leaders make better, faster decisions. Our
deep risk expertise, expansive information resources, and
innovative application of technology help our clients confidently
navigate an evolving marketplace. We are known for our
industry-leading and award-winning solutions, made up of research,
data, software, and professional services, assembled to deliver a
seamless customer experience.
Moody's Analytics, Inc. is a subsidiary of Moody's Corporation
(NYSE: MCO). With approximately 14,000 employees in more than 40
countries, Moody’s combines international presence with local
expertise and over a century of experience in financial
markets.
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Julianne Wiley julianne.wiley@moodys.com 970.445.4768
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