Renters in the U.S. are finally catching a break as rental costs decline in certain areas, thanks to a combination of increased housing supply and rising incomes. However, affordability remains a struggle for many, with a significant portion of renters still spending more than they should on housing.
What’s Driving the Trend?
Daryl Fairweather, chief economist at Redfin, attributes the improvement in rent affordability to a surge in apartment construction during the pandemic. “There are more apartments for rent now because there was a bit of a construction boom,” she explained. This increased supply has forced landlords and property managers to lower rents to stay competitive.
Additionally, renters are earning more than in previous years. According to a recent Redfin report, the median income for renters in 2024 is $54,752, a 5.3% increase from the previous year. However, despite this growth, many renters still struggle to afford housing. On average, renters need $58,928 to comfortably afford rent, highlighting an ongoing affordability gap.
“The majority of renters are rent-burdened,” Fairweather noted, meaning they spend more than 30% of their income on rent and utilities, a threshold defined by Harvard University’s Joint Center for Housing Studies as ‘cost-burdened.’
Where Are Rents Falling?
Some cities are experiencing more significant rent declines due to a combination of increased supply and reduced demand. Austin, Texas, tops the list of the most affordable metros, where renters typically earn more than what’s needed to afford a typical rental unit. The median renter income in Austin is $69,781, which is 25.14% higher than the $55,760 required to afford rent.
Other cities where rents are falling include Houston, Dallas, Salt Lake City, Raleigh, Denver, Phoenix, Washington, D.C., Baltimore, and Nashville. Fairweather explained that construction activity in these areas has “mediated rents,” increasing supply enough to moderate prices.
Waning demand is also a factor. Cities like Austin saw a surge in popularity during the pandemic as remote workers flocked to more affordable areas. However, as remote work trends stabilize and people return to offices, demand has softened, further driving down prices.
Where Are Rents Still High?
In contrast, metropolitan areas with limited new construction are struggling with high rents due to low supply and high demand. Providence, Rhode Island, for example, tops Redfin’s list of least affordable areas. Its proximity to Boston, an “extremely unaffordable” city, has led to “spillover” demand, pricing out local residents.
Major cities like Los Angeles, Miami, New York, and San Diego also remain among the priciest rental markets. These areas not only face limited housing supply but also attract high earners due to job opportunities and vibrant lifestyles.
Joel Berner, a senior economist at Realtor.com, summed it up: “Everything in the housing market is Econ 101—as long as supply remains low, prices will stay high.”
The Bottom Line
While rent affordability is improving in some parts of the U.S., many renters still face significant financial strain. Cities with robust construction activity and declining demand are seeing the most relief, while areas with limited new builds and high demand continue to struggle. For renters, the key to navigating the market lies in understanding local trends and prioritizing affordability.
Source: CNBC
