Photo: Robert Clark
Since the housing market collapse a decade ago, rising wages have improved accessibility to affordable rentals for median income Americans, according to a new study by the listing site RentCafe.
Today, fewer median income earners are rent burdened and have burden-free access to more apartments. Rent-burdened is defined as spending more than 30 percent of a household’s income on housing costs.
“The basic idea behind accessibility is fairly simple — it’s the percentage of all apartments in a market that one can afford with a given income,” reads the report.
Accessibility offers a more detailed look at the cross-section of where the job market and the housing market intertwine reveals what the rental market has to offer and for how much, and most importantly, how much of it can renters afford.
“A broader way to understand the rental market is by looking at accessibility, since comparing incomes against the number of units that are affordable gives an entirely different picture of a rental market,” writes real estate writer Balazs Szekely, who authored the study.
Rising home prices and erosion of affordability have caused demand to surge in the rental market. Renter households have steadily increased following the financial crisis, as for many Americans renting was the only way out of the collapse.
At the national level, the median renter income grants burden-free access to 49 percent of all rental stock, up 11 percentage points from 2011. Between 2011 and 2017, access to rental housing for median earners has improved in 40 of the 50 largest cities.
At the same time, nationwide median gross rent has grown by 16 percent while the median income for renter households has grown by around 26 percent. The highest accessibility rates were shaped by strong wages, not “cheap rents,” says Szekely.
Accessibility rates are the highest for median wage earners in Raleigh, North Carolina (71 percent), San Francisco, California (68 percent), and Omaha, Nebraska (64 percent).
But large salaries, expensive homes, and strict rent control have created a unique market in San Francisco, where the median renter household income is over $92,000 — more than twice the national level.
San Francisco’s favorable labor market conditions have of course impacted this figure directly, but as an indirect effect, they have also pushed the median home price to over $1 million.
“This makes renting the only way to go for young professionals, even for those with paychecks that most homeowners elsewhere in the country only dream about,” says Szekely.
At the other end of the spectrum, Philadelphia, Pennsylvania, Detroit, Michigan and New Orleans, Louisiana had the worst accessibility rates of the 50 largest cities.
Millennials are also fueling demand for rental housing. They are reportedly highly motivated to live in urban areas to be closer to booming job markets and they’re priced out of the buying market, so they’re renting.
And in some white-hot tech-driven markets, like San Francisco, employers offer competitive salaries and recruit many younger professionals who have yet to buy a home.