American Renters Can't Afford Their Apartments

American apartment renters are pushing their budgets, spending beyond their means amid high interest rates that are making it difficult for people to buy homes.

Households that tend to rent typically earn about $55,000 a year, according to real estate platform Redfin. But that is more than $11,000 less than what someone needs to earn to rent at an apartment at a median price of about $1,650 per month. Redfin deems affordability as being able to pay close to one-third of someone's earnings on rental costs.

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The median cost of a rental apartment in the U.S. has jumped 23 percent since 2019, according to Redfin, which noted that the amount of income needed to afford rent is at its highest since October 2022 and May's $1,650 median price is a little under $50 from the record high reached in August 2022.

High borrowing costs and high home prices have contributed to a jump in rent prices. Those twin forces have made it unaffordable for a lot of Americans to afford to buy a home, forcing people to pivot to renting, which has created competition for properties, pushing up prices.

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The pace of rental price increases has slowed and wages have been growing. But that may not be enough to help some households to afford their rent.

"For a lot of folks, the math still won't check out," Sheharyar Bokhari, Redfin's senior economist, said in a release. "Many U.S. renters are and will remain burdened by the cost of having a roof over their head, and unlike homeowners, they're not building wealth through rising property values.

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"Wage growth should continue to outpace rent growth in the coming months, as it has been doing since 2022. That will help narrow the affordability gap for renters, but for a lot of folks, the math still won't check out. Many U.S. renters are and will remain burdened by the cost of having a roof over their head, and unlike homeowners, they're not building wealth through rising property values."

Residents in cities like New York and Miami are especially struggling to afford their rentals. A typical New York renter makes about $67,000 a year, which is 43.5 percent less than what they need, the largest discrepancy of 33 cities that Redfin examined for its analysis. Miami's gap was at 42 percent, followed by Boston at about 39 percent.

"Multifamily construction surged during the pandemic, which is what caused rents to fall, but rents are now being buoyed by resilient demand," Redfin noted in its analysis. "Many young renters are opting to stay put rather than confront an increasingly unaffordable homebuying market. Still, there's still a backlog of new units that are hitting the market every month, which is putting a lid on how much prices can grow."