Wages for the typical U.S. worker have grown since the pandemic, but for many Americans those gains are being gobbled up by rising rent.
Rents have jumped 30.4% nationwide between 2019 and 2023 while wages during that same period only grew 20.2%, according to a recent analysis from online real estate brokers Zillow and StreetEasy. Gaps between wage growth and rent increases were widest in large cities, including Atlanta; Charlotte, North Carolina; Miami, Phoenix and Tampa. Other cities where renters are feeling the tightest pinch include Baltimore, Cincinnati, Las Vegas, New York and San Diego.
The cost of renting began its sharp climb during the pandemic, as demand roared due to Americans fleeing major urban centers and opting for more space away from neighbors in the suburbs and rural areas. Rent is still increasing, housing experts say, just at a much slower pace than in recent history.
Some locales including Austin, Texas, and Portland, Oregon, have seen rent decreases in the past year, according to the analysis, a stark contrast to more populated cities like New York, which “is heading in the opposite direction,” said StreetEasy Senior Economist Kenny Lee.
“New multifamily buildings coming online have eased competitive pressure in many markets, but in New York City construction just simply can’t keep up with demand,” Lee said in a statement.
The median U.S. rent rose to $1,987 in March, up nearly 0.8 % from a year ago, according to Rent.com. Rent has increased partially because of persistent strong demand from millennials and Gen Z adults who have been squeezed out of the housing market, Zillow’s analysis shows. Despite the increases, Americans continue to opt to rent in large part because it’s still cheaper than owning a home in major U.S. cities, according to an April Bankrate study.
Rent outpacing wage growth means that many Americans are using an even larger portion of their paycheck for shelter and most likely sacrificing the purchase of other necessities like child care, groceries or saving for a home down payment, in order to do so.
Rising rent, which has helped fuel homelessness across the nation, has forced millions of Americans into spending more than the recommended 30% of their monthly income on housing. Rent increases have also played a major role in preventing inflation from falling, according to the latest consumer price index data.
For now, the housing market’s affordability crisis is a major thorn in the side of Fed Chair Jerome Powell, who continues to remain optimistic that rents will eventually come down.
“I am confident that as long as market rents remain low, this is going to show up in measured inflation, assuming that market rents do remain low,” Powell said last week during a press conference. “What will be the exact timing of it? We now think significantly longer than we thought at the beginning.”