- The median U.S. rent takes 29.1 percent of the typical household income – up from 25.8 percent between 1985 and 2000.
- Renters in 34 of the nation’s 35 largest markets spend a larger share of income on rent now than they did historically.
- Homeowners now spend $3,300 less a year on mortgage payments than they would if mortgage payments required the same share of income as they did historically.
Rising rents are eating up an increasingly large share of tenants’ incomes, costing the typical U.S. renter almost $2,000 more per year than they would if renters were devoting the same-sized chunk of their paychecks to their landlord as they used to.
Currently, the median U.S. rental requires 29.1 percent of the median monthly income. However, in the more typical housing market years of 1985 to 2000, renters spent far less — just 25.8 percent of their income — on housing. If that percentage had stayed the same, renters now would be spending $1,957 less every year than they are.
In some markets, the difference is far greater: Renters in San Jose, Calif., spend 38.4 percent of their incomes on rent, compared to 26 percent historically, which meant paying a total of $13,525 more in rent this year. That’s enough to buy a decent recent-model used car every year – or take a six-month world cruise every few years. It could also put a dent in student debt or help build retirement savings.
In Dallas, the $5,298 annual difference would be enough to save a 20 percent down payment for a typical home there in eight years, based on the September median home value in Dallas of $214,800.
Owning a home is more affordable
While homeownership is not the best choice for everyone, it can mean lower ongoing payments than renting, depending on maintenance costs. In general, homeowners spend less of their income on house payments now than they did in the more typical housing market years of 1985 to 2000 – thanks in part to low mortgage interest rates, which keep monthly costs low even as housing costs rise. The difference, between 21 percent then and 15.4 percent now, means people are spending about $3,300 less per year on the typical mortgage.
While rent affordability has worsened in 34 of the nation’s 35 largest markets, rents in Pittsburgh have remained mostly level over the past several years, allowing incomes to keep up and even outpace rent appreciation. Renters in the Pittsburgh metro now spend a smaller share of income on rent than they did in pre-bubble years, meaning they are spending about $3,400 less per year than they would have at the historical rate.
Even in Pittsburgh, where rents have remained low enough that renters now spend $3,400 less a year than they would at the historical rate, the typical mortgage payment takes an even smaller share of income. Rent in Pittsburgh takes 22.5 percent of the typical renter’s income, down from 28.4 percent historically. But a mortgage payment takes just 10.8 percent — thanks in part to low interest rates.