Photo: Ian D. Keating/Flickr
As the country’s housing markets struggle with tight inventory and high demand for housing, rental affordability continues to be a concern as prices climb higher and higher. In many major markets, rental affordability is worse now than it was prior to the housing boom and eventual bust a decade ago, according to a recent report by the listing site Zillow.
On average, renters in the US will need to earn close to $170 more annually this year to keep up with anticipated increases — an increase, that as Zillow puts it, is on top of nearly five years of consistent rent increases. The national median rent is now $1,406 and is expected to climb to $1,420 over the next year.
However, renters in several other metros will have to earn quite a bit more per year. Seattle, WA, Los Angeles, CA and Boston, MA renters will need the highest income increases to keep up with rising rents — $1,248, $1,152, and $1,140 per year, respectively.
It’s interesting to note that, according to Zillow, these income increases merely maintain the current amount of “left-over” cash after rent is paid. And, in some major metros, the percentage of income required to pay rent is already more than the general 30 percent rule, that is to say not putting more 30 percent of income towards housing costs.
Currently in some markets, rent requires 40 percent or more of household income. But, rent appreciation is slowing, Zillow says, and rents are predicted to rise just 1 percent next year.
Further, in nearly all of the large markets, affording the median rent takes a larger percentage of income than before the housing bubble and crash a decade ago, says Zillow.
Renters in the New York metro area caught a break for a change with rent expected to actually decrease $9 in the coming year — requiring no change to annual income.
“For a long time now, renters have faced an affordability crisis when it comes to housing, and renters in some hot markets will still need significant raises just to keep up with rising rents,” said Zillow Chief Economist Dr. Svenja Gudell.
And while incomes have to bridge a wide gap to bring rental affordability closer to historic levels, recent gains are “being met with slowing rent appreciation, a welcome sign for renters,” he added.
Click here to read the entire report.