Renters are getting squeezed across the country as their rising housing costs far outpace their growth in income, according to a new study by the National Association of Realtors (NAR).
“In the past five years, a typical rent rose 15% while the income of renters grew by only 11%,” said NAR chief economist Lawrence Yun. “The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay.”
NAR studied data on income growth, housing costs, and changes in the share of renter and owner-occupied households over the past five years in 70 metropolitan statistical areas across the United States.
The top markets where renters have seen the highest increase in rents since 2009 are New York (50.7%), Seattle (32.38%), San Jose, Calif. (25.6%), Denver (24.1%), and St. Louis (22.3%).
While New York’s rents have increased by 50%, the income for renters 25 to 44 years old has increased by just 8% during the same time, according to the report. It’s a similar story in Seattle and San Jose.
Denver comes the closest to seeing a similar level of growth in rent and income (20.8%).
Some metros aren’t seeing the breathtaking increases in rent like New York, but they may be just as difficult for renters. This is because incomes have declined.
For example, Albuquerque, N.M., saw just a 10% increase in rent between 2009 and 2014. However, income for renters 25 to 44 years old fell by more than 12% during that same time.
Same thing in Providence, R.I. Rents grew 9.1%, but incomes fell 7.5%.
There were a few metros, including Dayton, Ohio; Detroit; Oklahoma City; and Salt Lake City, where income growth outpaced the increase in rents.
Yun said a way to relieve housing costs is to increase the supply of new homes, particularly for entry-level buyers. But, since the recession, builders have been hesitant because of rising construction costs and concerns about the re-emergence of young buyers.
He estimates housing starts need to rise to 1.5 million, which is the historical average. Housing starts have averaged about 766,000 per year over the past seven years.
Connect with Donna Kimura, deputy editor of Affordable Housing Finance, on Twitter @DKimura_AHF.