Study: Affordability Crisis Lingers Despite Normalizing Rent Growth
18 April 2024 - 3:00AM
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.”
Amber Bonefont
Florida Atlantic University College of Business
5617579188
abonefont@fau.edu