Sometimes it’s hard to look at statistics without having the air knocked out of you, like a hard punch to the gut. Just over a week ago, Zumper released it’s 2024 Annual Rent Report. One statement in it represented a large portion of the country getting winded through high average consumer rent:
“In 2024, renters spent an average of 42% of their pre-tax income on housing, up from 35% in 2021, even though a majority believed rent should be capped at 30% of income,” Zumper wrote.
It’s astounding and disturbing. Never before has the mismatch between what people make and what they must spend on rent been as broad as a natural chasm. Here’s a graph of US Bureau of Labor Statistics data on the Consumer Price Index of primary residence rent. The value in 1982 to 1984 is the basis of the comparison.
Moody’s in January 2023 wrote that for the first time in more than 20 years it tracked the ratio, the U.S. was nationally rent-burdened. That meant the national average rent-to-income radio showed average rents to be at least 30% of household income. The firm most popularly known for fiscal risk analysis, primarily pointed to rising mortgage rates (escalating house prices would add another hurdle) that priced many people and households out of buying. That meant going forward renting rather than building equity and avoiding predictable annual rent increases.
“Apartment demand surged as a result and drove rates sky high,” the firm wrote. “As the disparity between rent growth and income growth widens, American’s wallets feel financial distress as wage growth trails rent growth.”
To make this a bit more obvious, below is a graph of the Consumer Price Index (a popular government measure of inflation for primary residence rent and the indexed median household income in real (after inflation) terms from 1984 to 2023.
If your household is not well above median income, where real income grows roughly 10% or more a year, you can’t expect to make ends meet without a punishing struggle. As a reminder, here is a graph of how wages grow based on where in the economic strata you are, whether at the 25th percentile, median, or 75th percentile.
With all this, most members of the public are far too understanding. When Zumper asked people about the rents they paid, “only 50%” felt they had a good deal. Last year the number was 53%. But if the average means you shell out 42% of your income to afford a place to stay, it’s astonishing that the satisfaction reading isn’t far lower.
While more renters were confident in the economy than last year, according to Zumper, that was 18% versus 11%. Another way of framing the result is that 82% of the renters questioned don’t feel good about the economy and a 67% majority believe the nation is in a recession. When you can’t make enough money to readily handle all the costs of living, that doesn’t seem surprising.
The Zumper survey was of 7,205 renters aged 18 year or above from all 50 states and Washington, D.C. One factor that might bring the results into question is that the questionnaire went to “Zumper and PadMapper users based in the United States and shared among their family and friends.” That puts it into the category of self-selecting audience, so likely isn’t representative of the U.S. as a whole. Still, that is far from heartening.
Read the full article here
