Rising rental charges are taking up larger chunks of Americans’ income, putting a further squeeze on struggling households

Sharp rent increases in many parts of the country are eating up a bigger share of Americans’ monthly income, squeezing tenants already grappling with rising prices for gasoline, food and other necessities.

Households with a median rent of US$1,179 in August tapped 30.3 per cent of their monthly income to pay their rent, up from 29.4 per cent a year earlier, according to an analysis by Zillow. The real estate information company examined data on median rents and household incomes across 50 of the nation’s biggest cities.

Economists generally define housing as affordable when rent is less than 30 per cent of tenants’ monthly income. Renters who go above that threshold likely have a tough time making ends meet on other costs, like groceries, clothing, transport and utilities, to say nothing of saving for a down payment on a home.

“Earlier on in the pandemic we saw rent burdens actually decreasing in a lot of markets as rents were stagnating or even dropping as a result of the pandemic, but now that rents have recovered, we’re starting to see the affordability become a challenge again,” said Nicole Bachaud, economist at Zillow.

Apartment rents fell during the last three quarters of 2020 after the coronavirus recession kicked in. The national vacancy rate ticked up through the second half of 2020, reaching 5.3 per cent in the second quarter of this year, according to data from Moody’s Analytics REIS.

In the third quarter, the US vacancy rate declined to 4.8 per cent, while rents increased 7.4 per cent from a year earlier to US$1,585, according to Moody’s, which is forecasting rents could increase nationally by nearly 10 per cent by the end of this year.