Numerous financial experts advise that you should not pay rent above thirty percent of your gross income, according to a new study from BadCredit.org. But can that still be possible in 2024 with rental rates rising almost every day?
BadCredit.org examined two important variables—the median yearly salary for singles and the average monthly rental costs in 100 major American cities—to determine the amount of money the typical American spends on rent in the country. Based on the percentage of income allocated to rent for the previous five years, the study determined the average rent-to-income ratio in each U.S. city.
Key Findings:
- Rent is increasing at a faster pace than income. The national rent-to-income ratio has increased by 2.7% over 5 years—from 27.5% in 2018 to 30.1% in 2022.
- Nationally, rent has increased by 32.6% over 5 years, while the median income has increased by 20.8%.
- In Miami, rent accounts for 54.9% of a person’s income—the highest current rent-to-income ratio of any city analyzed. This has increased by 11% over the past 5 years.
- The lowest average rent-to-income ratio is in Wichita, KS (19.5%). Wichita is the only city analyzed with an average rent still under $1,000 per month.
Examining U.S. Cities with the Largest Changes in Rent-to-Income Ratios
The fact that monthly rent has increased since 2018—by precisely 32.6%—may not come as a surprise. The larger issue is that the average American’s salary has only climbed by 20.8% during the same time frame.
In Miami, rent increases have outpaced wage growth, exacerbating the disparity. Miami residents, on average, paid 43.9% of their total income in rent in 2018. Since then, it has risen to an astounding 54.9%, with an average monthly rent of about $2,600.
Six Florida cities, including Miami, have seen large rises in their rent-to-income ratios. Miami is one of the top 10 American cities where rent increases are greater than wage growth, along with Tampa, Lakeland, Deltona, Cape Coral, and Orlando.
However, Florida is not the only state that has noticed these differences. In Knoxville, TN, the average person’s rent is 32.6% of their income. While that seems reasonable, it is an increase of 8.2% from a commendable 24.5% in 2018.
The percentages of renters’ income that go for housing have similarly increased by about 6.7% in Allentown, PA, and Riverside, CA. Even while Allentown’s average monthly rent is still less than $1,600, it has risen by 36.4% over the past five years. The median income has only increased by 7.2% throughout this time. In Riverside, CA, rent has gone up 45.7% while income has climbed by 23.9%.
Cities with the Smallest Changes in Rent-to-Income Ratios See Little Progress
However, it’s not discouraging in all cities. In fact, in many regions of the nation, the opposite is true. Among the sixteen cities where income growth has exceeded rent growth is Louisville, KY. Only 8.8% more has been added to rent, while the median income has increased by 31.1%.
Although San Francisco and San Jose, CA, are well-known for having expensive living expenses, they have also seen a decline in the share of monthly income that tenants pay for their houses and apartments. While the median income in San Jose and San Francisco is $124,348 and $105,929, rent has grown to $2,986 and $3,176 per month.
Wichita, KS, has the lowest average rent-to-income ratio (19.5%). The only city in the analysis where the average monthly rent is still less than $1,000 is Wichita.
To read the full report, including more data, charts, and methodology, click here.
The post What Portion of the Average American’s Income Goes Toward Rent? first appeared on The MortgagePoint.
