Redfin Reports Only 39% of Renters Make Enough Money to Afford the Median-Priced Apartment

The income renters need to afford the typical apartment is the highest since 2022 amid a rebound in asking rents, which are now just $47 shy of their record high

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) —The typical U.S. renter household earns an estimated $54,712 per year, 17.3% less ($11,408 in dollar terms) than the $66,120 needed to afford monthly rent for the median-priced U.S. apartment ($1,653). That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Only 39% of renters make enough to afford the median-priced apartment.

The amount renters must earn to afford the median-priced apartment is at the highest level since October 2022. It’s up 0.8% year over year and up 22.9% from before the pandemic (May 2019), as that’s how much asking rents have risen. At $1,653, the median U.S. apartment asking rent in May was just $47 shy of its record high. Still, it’s worth noting that rent growth is essentially flat.

This is based on a Redfin analysis of median U.S. apartment asking rents as of the three months ending May 31, 2024, and estimated median incomes for renter households. We consider an apartment affordable if a renter spends no more than 30% of their income on rent.

“Rents are growing at a snail’s pace compared to the rapid increases we saw during the pandemic, and are unlikely to soar again anytime soon. As a result, wage growth should continue to outpace rent growth in the coming months, as it has been doing since 2022,” said Redfin Senior Economist Sheharyar Bokhari. “That will help narrow the affordability gap for renters, but for a lot of folks, the math still won’t check out. Many U.S. renters are and will remain burdened by the cost of having a roof over their head, and unlike homeowners, they’re not building wealth through rising property values.”

The income a renter needs to afford the typical apartment did drop last year, but is now rising again as rents rebound. It fell to as low as $63,920 in December 2023, when rents briefly dipped below $1,600, but that was still unaffordable for many renters.

Multifamily construction surged during the pandemic, which is what caused rents to fall, but rents are now being buoyed by resilient demand; many young renters are opting to stay put rather than confront an increasingly unaffordable homebuying market. Still, there’s still a backlog of new units that are hitting the market every month, which is putting a lid on how much prices can grow.

In New York and Miami, the Typical Renter Earns Roughly 40% Less Than They Need to Afford the Typical Apartment

In New York, the typical renter earns an estimated $67,358 per year. That’s 43.5% less than the $119,120 a renter needs to afford the median-priced apartment—the biggest gap among the 33 major metros Redfin analyzed. Next comes Miami (42.2% less), followed by Boston (38.7% less), Los Angeles (36.1% less) and Riverside, CA (30.8% less).

New York is perennially one of the most expensive rental markets, but affordability challenges have been intensifying; rents rose 9.2% from a year earlier in May—one of the biggest increases in the nation.

In Miami, rents fell 4.2% year over year, but affordability remains strained because costs soared so much during the pandemic moving frenzy.

The Typical Renter Earns Enough to Afford the Median-Priced Apartment in Just Five Metros Redfin Analyzed

In Austin, TX, the typical renter earns an estimated $72,808 per year. That’s 16.8% more than the $62,360 a renter needs to afford the median-priced apartment (a big jump from 2023, when the typical renter earned just 2.7% more). There are four other major metros Redfin analyzed where renters earn enough to afford the typical apartment: Houston (10.2% more), Phoenix (9.2% more), Washington, D.C. (3.2% more) and Dallas (0.9% more).

Austin has seen one of the steepest dropoffs in rents in the U.S., helping to make apartments more affordable. The median apartment asking rent in the Texas capital fell 7.2% year over year in May—the third biggest decline among the metros Redfin analyzed. Rents also fell in Phoenix and Dallas, down 5.5% and 1.3%, respectively.

Rents are falling in the Sun Belt in part because the region has been building more apartments than other parts of the country (like the Midwest and Northeast) to meet demand brought on by the influx of people who moved in during the pandemic. But the pandemic housing boom is now in the rearview mirror, and property owners are facing vacancies, which is causing rents to cool.

Washington, D.C., which has a lot of high-income transient workers, is the most notable outlier in the table above. While the typical renter earns slightly more than they need to afford the median-priced apartment, the gap is shrinking as rents rise; the typical D.C. renter earns $2,656 more than they need to afford the median-priced apartment, compared with $6,487 more in 2023. Asking rents in Washington, D.C. rose 11.1% from a year earlier in May—the biggest jump among the metros Redfin analyzed.

To view the full report, including charts, methodology and more metro-level data please visit:
https://www.redfin.com/news/renter-incomes-affordability-2024

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240624884667/en/

Redfin Journalist Services:
Kenneth Applewhaite
press@redfin.com

Source: Redfin

Released June 24, 2024