If it seems like it’s getting harder and harder to cover the cost of leasing a place to live, there’s now data to prove it: Americans’ incomes just aren’t keeping up with the rent.
In 2021, 49% of renters were cost-burdened, meaning their rent took up 30% or more of their income, according to an analysis of Census data published this week by the Harvard Joint Center for Housing Studies. More renters were feeling the pressure than they ever have since data began in 2001. Renters’ budgets were caught in a vise between rising rents and falling incomes, according to the analysis of the Census Bureau’s American Community Survey data.
The report highlights the financial squeeze that the pandemic economy put on renters, especially those with lower incomes. Cost-burdened renters pay so much of their income toward shelter that they may have difficulty covering other basic expenses, like food and transportation, according to the Department of Housing.
Rents surged during the pandemic, with the median nationwide rent rising 15% in 2021 alone, data from Rent.com showed—many times the typical 2-4% annual increases seen in normal years. At the same time, renters’ income fell, dropping 2.3% to $43,500 from $44,500 in 2019, the Census showed.
The pandemic-era rush for real estate was to blame for rents rapidly rising, said Jon Leckie, a researcher at Rent.com. People priced out of the frenzied housing market were forced to rent instead, driving up demand.
“The housing market was going nuts.” Leckie said. “And rent will follow the housing market.”
In 2022, rent increases moderated as the housing market cooled, with the typical rent up 4.8% year-over-year as of December, Rent.com said in a report last week. That’s a big improvement from earlier, but still outpaces average weekly earnings for workers, which rose 3% over the same period, according to the Bureau of Labor Statistics. And with the pandemic-era rental price hike showing no signs of fully deflating, the pressure on renters’ budgets is unlikely to let up anytime soon, Leckie said.
“I think it's unlikely that rents are really going to come back down,” he said. “And the only answer then, I think, is that wages have to come up. And if they don't, I don't know how that ends well.”