Renting and Buying Are Less Affordable Than Ever

Nearly all of the 50 biggest metro areas in the US have become less affordable for renters and prospective first-time homebuyers over the last two decades, with the percentage of income devoted to rental payments rising sharply in most regions. 

A new report from the Mortgage Bankers Association’s Research Institute for Housing America shows that annual median rent growth rose at 2% above inflation, whereas annual median income rose 0.8%, leading to a typical household spending 7.6% more of its income to rent a median-priced housing unit in 2020 versus 2021.

The population-weighted median rent of a two-bedroom unit across the 50 largest metros is forecast to be $1,629 per month this year, according to the study, marking a 4.3% increase over 2020 and the seventh consecutive year in which rents are projected to rise faster than inflation. Perhaps unsurprisingly, the highest rents were found in the cities with the highest median household incomes, with annual median rents $324 higher for every $1,000 increase in median income. And in Seattle, for example, rents appreciated an eye-popping 376% faster than median incomes between 2001 and 2020.

“There is a significant lack of affordable housing supply in the United States, and the problem is worsening. In 2001, a low- and moderate-income household could spend less than 30% of its income to rent the median rental unit in 38 of the largest 50 metro areas. By 2020, this was the case in only 17 metro areas,” said Michael Eriksen, author of the report and West Shell Associate Professor of Real Estate at the University of Cincinnati and Academic Director of the Real Estate program. “The highest and fastest-growing rents have been in cities with strong employment and population growth that have a scarcity of developable land, primarily because of geography and land-use restrictions.”

The analysis also digs into the availability of subsidized rental housing for LMI households in the 50 largest US metros, and examines how the 2018 mandatory adoption of Small Area Fair Market Rents (SAFMRs) in 24 metros starting in 2011 affected the surrounding neighborhood poverty rates of Housing Choice Voucher (HCV) recipients.   

“Our research finds that the innovation of Small Area Fair Market Rents to increase payment standards in low-poverty neighborhoods has become an important desegregation tool that creates more economic opportunities for low-income households,” said Eriksen. “As this payment standard expands to other areas, care should be taken to ensure it does not come at the cost of punishing recipients who choose to live in their existing neighborhoods.”   

The study also found that the number of renter households earning less than 60% AMI grew by 1.4 million between 2005 and 2019, an increase of 14.8%. Nearly 40% of subsidized renters lived in neighborhoods with a poverty rate above 20% in 2019—nearly double the percentage of all renter households, and there was less than one rental subsidy available for every three otherwise income-eligible renter households in 2020.