A new analysis of rental data from Zillow and StreetEasy, along with wage data from the Bureau of Labor Statistics, shows that rent prices have skyrocketed in recent years and wages have not kept pace. While last year was a positive time (wages grew faster than rents nationally and in nearly half of major U.S. metropolitan areas), the opposite was true in New York City, where the gap emerged largest in the country.
According to the report, since 2019, rents in the US have grown 1.5 times faster than salaries. Demand for rentals from the larger millennial generation and Gen Z adults has run into the country’s housing shortage, causing rents to rise rapidly.
That trend cooled last year, when national rent growth (3.4%) was outpaced by wage growth (4.3%). Strong multifamily construction has helped absorb demand for apartments, keeping rental growth in check across much of the country.
But rents grew more than seven times faster than wages in New York City’s five boroughs last year. That gap between rent growth (8.6%) and wage growth (1.2%) in New York City was larger than in any of the 50 largest metropolitan areas in the United States.
“It is encouraging to see much of the country making even modest progress on the rental affordability crisis. Unfortunately, New York City is going in the opposite direction,” said Kenny Lee, chief economist at StreetEasy.
“Despite the strong job market in the city, and in some ways because of it, the gap between what a typical renter can afford and the market rental price is growing. “The coming online of new multifamily buildings has eased competitive pressure in many markets, but in New York City, construction simply cannot keep up with demand,” Lee added.
Moderation in rent growth across the country has given wages a chance to recover, providing respite for renters in many markets. Rents fell in three markets last year: Austin; Portland, Oregon; and San Francisco, while wages continued to grow. In 20 other metro areas, rents rose, but wages grew faster, giving renters some breathing room.
Florida markets occupy three of the five places where rent growth has most dramatically outpaced wage growth over the past five years. Florida has been a major migration hotspot since the pandemic, with new residents attracted by the possibility of year-round outdoor living and relatively affordable housing compared to many coastal markets.
This increase in demand has caused rents to skyrocket in the state, while wages have struggled to keep up. Even in Miami, where wage growth has been slightly above the national average, a nearly 53% increase in rents (the most dramatic jump of any American market) has left a huge gap between the income residents earn and the income they need to live comfortably. pay the typical rent for the area.
Salaries have consistently outpaced rents in recent years in only six large metropolitan areas. The largest gaps have occurred in San Francisco, San Jose and Houston.
To see the complete report and its methodology, go here.
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