Study: Affordability Crisis Lingers Despite Normalizing Rent Growth

By Amber Bonefont | 04/16/2024

Tags: Faculty-Research | Housing-Market | Press-Releases | Real-Estate
Categories: Academics | Faculty/Staff | Research | Initiatives

Many Households Need Six-figure Salary to Afford Typical Unit

Rental Market

Rent growth in the United States has returned back to the typical yearly increase for the most part, though many households are still struggling to afford rents, according to researchers at Florida Atlantic University and two other schools.

Nationally, rents rose 3.53 percent year-over-year, in line with the typical rental increase usually seen in a more balanced market, February data from the Waller, Weeks and Johnson Rental Index shows.

This trend is reflected in many parts of the country. Forty-three metropolitan areas either saw year-over-year declines or rent increases of less than the current national average of 3.53 percent. Five metros saw rents drop: in Austin, rents declined 3 percent year-over-year; Cape Coral, rents declined almost 2 percent; San Antonio, Texas, a .54 percent decline; North Port, a .20 percent decline; and Portland, a .15 percent decline.

“A rental increase of between 3 and 5 percent is seen as normal, so these numbers suggest that the rental crisis is over in most parts of the country,” said Ken H. Johnson, Ph.D., a real estate economist with FAU’s College of Business. “In some areas in the North and Midwest, rent growth is still increasing, but the growth is nowhere near as rapid as years prior. All in all, this suggests that rent appreciation is cooling and rental markets around the country are beginning to normalize.”

The Waller, Weeks, and Johnson Rental Index, part of FAU’s Real Estate Initiative, measures where the average rent is in the 100 most populated metropolitan areas in the United States and compares it to where rents should be in these metros based on statistical modeling of historic rental prices. Johnson, along with fellow researchers, Shelton Weeks, Ph.D., of Florida Gulf Coast University, and Bennie Waller, Ph.D., of the University of Alabama, also measure average yearly increases, monthly increases and how much money the typical household needs to make to avoid paying more than 30 percent of their income toward rent.

Renters should brace themselves for a prolonged affordability crisis until incomes increase to compensate for rising rents, researchers said. Ten metropolitan areas, including South Florida, require households to make well over $100,000 to avoid paying more than 30 percent of their income to rent.

“Rarely do we see major dips in rent, so households should not wait for the possibility of rents to fall dramatically,” Waller said. “Incomes need to rise to match current rents so renters can no longer feel the sting of the affordability crisis.”

Until then, many households will be forced to either pair up or consume less to pay rent.

“One of the repercussions will be more density – the average number of people living in a unit,” Weeks said. “Historically, you will see more people room or live together during periods characterized by unaffordable housing, like multigenerational families living together or college roommates choosing to continue rooming together. As incomes catch up to current rent prices, density numbers will decline once again.”