Photo: Jim Bauer/Flickr
Despite a booming economy and a strong jobs market, lagging wage growth and rising rents are starting to price many Americans out of several previously affordable rental markets, according to a new report by the personal finance site SmartAsset.
“The cause of the rent increase was split between two problems — large rent increases outpacing substantial gains in income, or stagnant income growth amplifying the impact of small rent increases,” reads the report.
To compile its list, SmartAsset compared rent prices from 2014 to 2017 and household incomes over the same period. It subtracted the 2017 rent as a percent of household income from the 2014 rent as a percent of household income and the cities with the largest difference, where the relative cost of rent went up the most, ranked first, and the city with the smallest difference ranked last.
In all, six of the top 10 cities with the largest rent increases are either in the Midwest or California. But many of the expected white hot Golden State markets, like San Jose and San Francisco, didn’t make the cut.
“New York, San Francisco and Los Angeles, three cities with traditionally high rents, actually saw their relative rent costs fall. This is due to large increases in the median household income in those cities,” reads the report.
Instead, Long Beach, Sacramento, and San Diego landed on the list in the number 3, 5 and 10 spots, respectively.
Detroit, MI took the number one position with the average market rent growing almost $400 dollars from 2014 to 2017. At the same time, the median annual household income grew by nearly $4,600.
Meaning, if the typical Detroit household wanted to rent the average apartment, it would need to spend just under 47 percent of its total income on housing costs alone — well over the accepted 30 percent industry standard. That’s up almost 10 percent from 2014.
New Orleans, LA came in second, where Airbnb usage could be to blame for the sudden increases in rent.
While the average rent increased by $330 in the Big Easy, or nearly $4,000 per year from 2014 to 2017, incomes are not rising very fast. The average household saw its income rise by just $1,500 over the same period. Rent as a percent of household income rose by only 9.1 percent from 2014 to 2017.
The average rent in Long Beach in 2014 was less than $1,600 per month, but demand outpaced new supply from 2014 to 2017, and the cost of rent jumped up to $2,100 per month.
And while incomes in Long Beach have grown, they haven’t risen enough to alleviate the new rent burden — monthly rent went from being just under 35 percent of household income to just under 42 percent from 2014 to 2017, an increase of 7 percent.
Rounding out the top ten were Philadelphia, PA (4), Charlotte, NC (6), Nashville, TN (7), Milwaukee, WI (8), and Columbus, OH (9).
“When residents are forced to devote ever-increasing portions of their paychecks to rent, the scenario not only impacts their ability to pad their savings accounts but also lowers their demand for other goods,” reads the report.