Spending 30% of Income on Rent Is the New Normal

Although higher rent burdens dropped from 49 metros down to five in the first quarter of 2023, many metros still sit above 30% of income being spent on rent.

According to Moody’s Analytics’ U.S. State of Rent Burden report, there was a 91% drop from Q4 2022 to Q1 2023 in the number of U.S. primary metros still experiencing higher rent burdens as rent-to-income ratios (RTI) finally cool after over three years of climbing rates.

“The fever is finally breaking. Since Q4 2019, 82% of metros had higher rent burdens compared to pre-COVID because rent disproportionately rose faster than incomes,” writes Lu Chen, senior economist, and Mary Le, economist, Moody’s Analytics. “Rising mortgage rates caused many households to be priced out from home buying and would-be buyers to remain renters. Apartment demand surged as a result and drove rates sky-high. The vast majority (91%) of all metros finally caught a break from growing rent burdens in Q1, as rent growth moderated or even declined given affordability pressures and slowing migration. However, we are not quite at an inflection point yet.”

Compared with past decades, the cost of shelter remains significantly higher relative to wages even with the near-term relief. New York City was the only metro rent-burdened in 1999, with a median household allocating 53.5% of their income to the average-priced apartment. According to Moody’s Analytics, the pandemic exacerbated the issue increasing NYC’s RTI by 8.4% between Q4 2019 and Q1 2023 to 66.9%.