Over the past decade, the rental market has expanded significantly. The Joint Center for Housing Studies at Harvard estimates that the market added an average of 1 million renters each year between 2010 and 2016, when the number of renting households began to level off at around 43 million. The augmented market means that more renters are now older, often with kids, and are higher earners, which sparked a demand for spacious luxury apartments.
According to the JCHS, the majority of new rental units in the U.S. between 2006 and 2016 cost $1,500 or more. Nearly 4 million of these high-end units opened up, yet there were only 2.1 million new units that rented for $1,100 to $1,499, and 1.3 million for $850 to $1,099. The market had a net loss of about 480,000 units with rents of less than $650.
Despite the fact that more of today’s renters have higher incomes, renting also remains the most popular option for low-income households. The U.S. Department of Housing and Urban Development recommends that households spend no more than 30% of their incomes on housing to avoid a cost burden that jeopardizes the affordability of other necessities, like food, health care, and clothing. Nearly half of U.S. renters exceed this benchmark.
With the 30% rule as our basis for affordability, we analyzed Rentable and U.S. Census Bureau Data to look more closely at housing cost trends. With the mismatch between supply and demand for affordable housing, which renters are left most vulnerable? What must renters be earning across the country to keep up with the high-end market?
Minimum Earnings to Afford an Apartment
Where we can live is dictated by our income, but what if it’s not enough? Our analysis found that renters nationwide would need to earn $41,760 to afford a one-bedroom apartment without spending more than 30% on rent. Based on median income data, only 43.8% of employed people — homeowners, renters, and others — can.
Looking at statewide trends, renters in the Northeast face the largest challenges. In Rhode Island, renters would need to earn $87,925 to afford a one-bedroom apartment — the highest figure in the country that leads to the smallest percentage of employed people that earn enough, at just 14%. Massachusetts, Maine, New York, Vermont, and Maryland are all among the 10 least affordable states.
Hawaii, too, poses tall hurdles for renters. In Hawaii, renters need to earn $73,238 to afford a one-bedroom, and only 20.1% of people do. In Mississippi, renters need to earn just $42,066, and yet only 34.6% of people do. Florida sees a similar trend, with renters needing an annual income of $43,602, and only 34.9% of employed people meeting that threshold.
In exactly half of the states, less than half of the employed population earn what it takes to afford a one-bedroom apartment. In another 15 states, less than 60% earn enough.
For the remaining 10 states, the numbers are slightly more encouraging, although there is only one state with more than 70% of employed people earning enough to afford one-bedroom rent: South Dakota. In that state, renters need to earn only $21,000 to afford a one-bedroom, and 74.2% of employed people meet that requirement.
Where Apartments are Most (and Least) Affordable
Looking at affordability by state gives us a good idea of how affordable housing is around the country. But within those states, the dynamics that renters are facing vary widely. To examine those circumstances more closely, we analyzed both median one-bedroom rent price and the median income of employed people in 86 MSAs around the country.
Detroit apartments, as it turns out, are the most affordable for the area’s employed people. Detroit-Warren-Dearborn, MI, has the highest percentage of employed people who can afford a one-bedroom apartment, at 72.4%. Springfield, MO (72.3%), and Wichita, KS (72.1%), are closely behind. Green Bay, WI (70%), also makes the top 10, as do three Ohio MSAs: Toledo (69.3%), Dayton (67.6%), and Columbus (66.2%).
In all of our 10 least affordable MSAs, less than 30% of employed people earn enough to spend less than 30% of their income on the area’s median rent. In New York-Newark-Jersey City, NY-NJ-PA, it’s only 14%.
Nearly 5 percentage points behind New York, Miami-Fort Lauderdale-West Palm Beach, FL, is the second least-affordable area for renters, with just 18.9% of employed people earning enough to afford rent. Urban Honolulu, HI, following the state’s high rent trends, comes in at #4, with 21.9%
Unsurprisingly, California accounts for three MSAs in the top 10: San Francisco-Oakland-Hayward (24%), Los Angeles-Long Beach-Anaheim (25.4%), and San Diego-Carlsbad (29%). Only one Midwestern area broke the top 10: Chicago-Naperville-Elgin, IL-IN-WI (27.6%).
Affordability by Renter Demographics
Every renter has a unique financial situation, but it’s important to look at which types of renters are disproportionately being left behind amid climbing rents. As we explore the affordability of rent in MSAs around the country based on sex, age, and race/ethnicity, keep in mind the national context: 43.8% of employed Americans can afford the median one-bedroom rent.
Male vs. Female Renters
First, let’s look at one of the largest demographic divisions: men vs. women. Given that women earn about 79 cents to a man’s dollar, we can expect that the overall percentage of men who are able to afford the median one-bedroom rent will exceed that of women — and that rings true. Nationally, 50.9% of employed men can afford rent, compared with 35.9% of employed women.
In no area were rents more affordable to women than to men, but in some areas, the disparity is fairly small. Gainesville, FL, has the smallest discrepancy between women and men who can afford rent: 45.4% to 50.1%, respectively. Tucson, AZ, is also a fairly level market, with 59.6% of women and 66.2% of men able to afford rent.
However, in three MSAs, women are less than half as likely to be able to afford their rent than men: In New Orleans-Metairie, LA, 30.3% of men can afford their rent, compared with 13.8% of women. New York-Newark-Jersey City, NY-NJ-PA, has the smallest percentage of women who can afford one-bedroom rent, at just 8.9%, compared with 18.6% of men. Boston-Cambridge-Newton, MA-NH, is affordable for 26.8% of men and 13.1% of women.
The gender housing affordability gap seems to plague large cities the most. In addition to New York and Boston, Seattle-Tacoma-Bellevue, WA; San Jose-Sunnyvale-Santa Clara, CA; Miami-Fort Lauderdale-West Palm Beach, FL; Chicago-Naperville-Elgin, IL-IN-WI; and San Francisco-Oakland-Hayward, CA, also rank in the top 10 for greatest discrepancies.
Renters by Age
Another highly influential demographic category is age. Millennials (ages 18 to 34), the largest generation, are still trying to build lives for themselves and grow their careers, and their precarious financial situation has been making headlines for years. So where can they afford rent?
Compared with Generation Xers (ages 35 to 50) and Baby Boomers (ages 51 to 69), Millennials have the best chances of affording one-bedroom rent in Green Bay, WI. More than 58% of Green Bay Millennials can afford rent, compared with 79.3% of older generations. Little Rock-North Little Rock-Conway, AR, also gives Millennials a good chance (55.6% compared with 79.6%), as does Detroit-Warren-Dearborn, MI (55.5% compared with 81.7%).
Again, Ohio is well-represented on the list, with both Columbus and Toledo ranking in the top 10.
Much like with the gender affordability gap, large cities prove the most problematic for generation-based discrepancies. In Boston-Cambridge-Newton, MA-NH (6.7% vs. 27.8%); Washington-Arlington-Alexandria, DC-VA-MD-WV (8.2% vs. 32.5%); and Miami-Fort Lauderdale-West Palm Beach, FL (6.7% vs. 24.3%), Millennials are about a quarter as likely as Gen Xers and Boomers to be able to afford a one-bedroom apartment.
Nowhere are Millennials more disadvantaged than in New York-Newark-Jersey City, NY-NJ-PA, where just 5.5% can afford a one-bedroom apartment; however, older generations fare only a bit better, at 18%.
Eugene, OR, with a population of about 167,000, feels a bit out of place on this list that includes some of the largest cities in the country. But in Eugene, Millennials are only about a third as likely as older generations to be able to afford rent: 17.8% compared with 53.9%.
Minority Renters
An earlier report we released focused on minority homeownership rates found that, in a nation where 63.1% of householders own homes, only 46% of minorities did the same, likely because it takes minority populations years to decades longer to save for a down payment. Does the trend duplicate itself for rent affordability?
Unfortunately, yes. And again, it’s large cities like New York-Newark-Jersey City, NY-NJ-PA; Los Angeles-Long Beach-Anaheim, CA; Miami-Fort Lauderdale-West Palm Beach, FL; Chicago-Naperville-Elgin, IL-IN-WI; San Francisco-Oakland-Hayward-CA; and San Diego-Carlsbad, CA, that have the largest discrepancies between minorities and whites who can afford rent.
By a margin of 10 percentage points, the New York area is where minority populations — black or African American, Hispanic, and Asian households — struggle the most. Just 7.5% of employed minorities in New York can afford a one-bedroom apartment, compared with 20.8% of whites.
Smaller areas, on the other hand, tend to be much more livable for minorities. Fargo, ND-MN, has the smallest gap between minorities and whites who can afford rent: 59.5% compared with 62.4%. Apartments in Ann Arbor and Detroit-Warren-Dearborn, MI, also are fairly affordable for minorities and whites alike.
Eugene, OR, though tough on Millennials, is easier for minorities to manage, with 33.8% of employed minorities able to afford rent and 40.4% of whites. Ohio maintains its presence in the top 10 for affordable housing for all populations, with Dayton coming in at #6. In Dayton, 56.5% of minorities can afford rent, compared with 70.6% of whites.
Little Rock-North Little Rock-Conway, AR; Springfield, MO; and Detroit-Warren-Dearborn, MI, are the only three MSAs to rank in the top 10 most affordable for all of the demographic groups we’ve examined.
Renters Most Left Behind
We’ve covered a lot of data in a lot of areas and states, but we’ll need to zoom back out to see which demographic groups are struggling the most overall to keep up with the increasingly expensive rental market.
For a national median one-bedroom rent price of $1,044, 43.8% of employed people can afford rent without exceeding 30% of their income on rent. For men, that figure is 50.9%, compared with just 35.9% of women. But minorities struggle more yet, with just 33.3% able to comfortably afford rent.
Millennials, however, face the toughest odds, with about 27% able to afford rent. Granted, in addition to a swath of older Millennials with families and stable work, this age group also includes many younger workers, just beginning to strike out on their own.
Conclusion
Despite the differing demographics and MSAs most affordable for each, one trend transcends them all: In larger cities, where rent affordability is already problematic, the problem is only exacerbated for more vulnerable populations.
Given this overarching theme, we can only hope for future high-end housing constructions to be tempered with more affordable options as the rental market continues to stabilize.
For press inquiries, contact contact Sam Radbil.
Methodology
We used Rentable.co listings to calculate the median February 2018 one-bedroom rent nationwide, by metro, and by state, and then used that figure to find the total income residents would need in order to spend no more than 30% of their income on rent — a housing cost guideline recommended by the U.S. Department of Housing and Urban Development that formed our metric of affordability.
Using data from the U.S. Census Bureau’s 2016 ACS 1-year public use microdata sample (PUMS), we found the percentage of employed residents in each state and metro who met the income threshold to afford median rent in their area. Because the PUMS uses only Public Use Microdata Areas (PUMAs) as the geographic identifier for each record, we used the IPUMS MSA-PUMA crosswalk tables to assign each PUMA to the MSA in which it lies in order to do a metro-level analysis. Occasionally a PUMA intersects multiple MSAs, so we only included a PUMA in an MSA if at least 50% of the PUMA population lives within the MSA.
Using the above process, we then calculated the percentage of men, women, minorities, whites, Millennials, and older generations (Baby Boomers + Generation Xers) that could afford rent. The ACS asks two questions relating to race and ethnicity: Hispanic origin and race. We defined minorities as those with Hispanic origin or with no Hispanic origin but of a race other than white. We defined Millennials as those aged 18-34, and Baby Boomers and Generation Xers as 35-69.
