A Look at Small Asset Rental Affordability Across the Largest U.S. Metro Areas
The share of household income spent on housing costs for small properties ranges significantly across the largest U.S. cities. Overall, this share has declined slightly with the ongoing economic recovery, improving affordability in recent years.
Average Rent Burden Across U.S. Metros
Apartment affordability across U.S. cities has become a hot-button issue and is frequently framed as a tussle between rising rents and household income levels.
As depicted below, households on average spend 35.6% to 45.3% of their income on housing costs across the top 20 U.S. metros, centered on a national average of 39.2%1 .
New York and Los Angeles, which together comprise about 10% of all U.S. small asset household demand, come in at 41.5% and 43.7%, respectively, underscoring the national dimension of the affordability issue.
As widely reported, Southern California (Los Angeles, Riverside-San Bernardino, and San Diego) and Miami are in the grips of a housing crisis. Households in these metros, on average, spend the largest share of income on rental housing costs.
Conversely, while technology centers like San Francisco and Seattle have high average rent levels, when expressed as a share of relatively higher household income levels, rent burden appears to be less severe in these locations.
Some Affordability Improvement in Recent Years
At the same time, affordability has improved slightly in recent years, stemming from an uptick in workers’ wages and a slowdown in rent growth.
As expressed below, compared to the national average decline of 1.0%, 11 out of the largest 20 metros experienced sharper declines in the household income share of housing costs.
The largest two metros – New York and Los Angeles – declined by 1.1 percentage points each. Other top 10 metros such as Chicago, Dallas, Miami, Philadelphia and San Francisco, experienced larger drops. At the same time, small property rental accommodations became less affordable in Houston, DC, and Boston.
Small asset stakeholders need to keep an eye out for overheated markets, which typically lead to worker out-migration on the demand-side, and inventory growth on the supply-side, resulting in future price adjustments.
1 All data is sourced from the American Community Survey (ACS), unless otherwise stated. ACS statistics are sample-based estimates of the compositional profile of the total population in the given year of data collection, and include a margin of error.