Rental Affordability Worsened Year-Over-Year

While inflation has begun to moderate, paying rent remains a struggle for many Americans. The Realtor.com February Rental Report found that despite a slight decrease in rent prices, affordability continued to get worse in 26 major metros that were analyzed.

In February, the median rent in the 50 largest metros declined to $1,716, down $1 from last month and $48 from the peak. However, rents are still up 3.1% from one year ago, making rental payments less affordable. Renters earning the typical household income devoted 25.3% of their income to lease a typical for-rent home, up from 24.8% a year ago.

February Highlights

• February 2023 marked the seventh month in a row with a single-digit rate of increase for 0-2 bedroom properties (3.1% Y/Y).
• The median asking rent in the 50 largest metros declined to $1,716, down by $1 from last month and $48 from peak.
• Rent growth accelerated in 2-bedroom units for the first time after a whole year of slowing. Rent by size: Studio: $1,463, up 4.4% ($62) year-over-year; 1-bed: $1,621, up 4.4% ($69) year-over-year; 2-bed: $1,890, up 2.9% ($53) year-over-year.

"The general rule of thumb is that you shouldn't spend more than 30% of your income on housing, but the data shows that in eight of the 50 largest metros, many renters are doing just that," said Realtor.com^® Chief Economist Danielle Hale. "Slowing rental price growth is a positive for renters, but it's important to put this in context. This means that affordability is worsening at a slower pace in many markets; it's not getting better."

The pace of rent growth has slowed for the past 13 months and experienced single-digit growth for the past seven months. Despite this, rent prices are still $296 (20.8%) higher than the same time in 2020 (pre-pandemic).

In February 2023, rent was less affordable than in the previous year. Renters earning the typical household income devoted 25.3% of their income to lease a typical for-rent home (vs. 24.8% in February 2022). Some 8 of the top 50 metros had a rent share higher than 30% relative to the median household income. Miami was the least affordable rental market in February 2023. The median rent for a typical 0-2 bedroom unit in Miami, FL, is 1.4 times as high as the estimated maximum affordable rent for the median household.

Oklahoma City, OK, is the most affordable rental market in February 2023. The median rent for a typical 0-2 bedroom unit made up 58% of its estimated maximum affordable rent.

In February 2023, the U.S. rental market experienced single-digit growth for the seventh month in a row after thirteenth months of slowing from January’s peak 16.4% growth. Median rent across the top 50 metros was up just 3.1% year-over-year for 0-2 bedroom properties. The median asking rent was $1,716, down by $1 from last month and $48 from the peak but is still $296 (20.8%) higher than the same time in 2020 (pre-pandemic).

Least affordable rental markets in Feb. 2023:

1. Miami-Fort Lauderdale-West Palm Beach, Fla. – $2,349 or 42.3% of income
2. Los Angeles-Long Beach-Anaheim, Calif. – $2,864 or 39.2% of income
3. New York-Newark-Jersey City, N.Y.-N.J.-Pa. – $2,895 or 37.5% of income
4. San Diego-Carlsbad, Calif. – $2,844 or 36.6% of income
5. Riverside-San Bernardino-Ontario, Calif. – $2,145 or 32.5% of income
6. Boston-Cambridge-Newton, Mass.-N.H. – $2,829 or 32.0% of income
7. Orlando-Kissimmee-Sanford, Fla. – $1,769 or 31.1% of income
8. Tampa-St. Petersburg-Clearwater, Fla. – $1,691 or 31.1% of income

Head inland to find affordability
All eight of the most rent-burdened metros are located along the coast with Fla. (three markets) and Calif. (three markets) leading the pack. On the other hand, the American Heartland led the way in terms of affordability. Oklahoma City, Okla. was the most affordable rental market in February with residents paying 17.4% of income on rent, followed by Columbus, Ohio (18.2%), Minneapolis, Minn. (19.0%), Cincinnati, Ohio (19.4%), and Kansas City, Mo. (19.8%).

"While these American Heartland markets still offer relative affordability, they are not immune to price hikes. As we saw in the January Rental Report, these markets are experiencing some of the fastest year-over-year price growth in the country," said Hannah Jones, economic research analyst, Realtor.com. "Before signing a lease, it's important to take a good look at your monthly income and expenses and make sure that the payments won't stretch your budget too much."

Larger Units See Growth Rebound

In February 2023, the rent growth of two bedrooms increased to 2.9%, marking the first acceleration after a whole year of slowing down. The median rent for two bedrooms was $1,890 nationally, $53 (2.9%) higher than the same time last year but still $57 lower than July’s peak. Even though rent growth for larger units has slowed the most relative to last year, larger units had the biggest premium over the past three years, up by $352 (22.9%).

Rent growth for one-bedroom went up and down on a year-over-year basis in recent months, reaching 4.4% in February 2023. In addition, February is the third straight month that we saw positive rent gains in one-bedroom on a monthly basis. In February, the median rent increased to $1,621, up by $10 compared to last month but still  $21 less from July’s peak. Nevertheless, it is still up by $69 (4.4%) compared to the previous year and $292 (22.0%) higher since February 2020.

In February, rent growth in studios continued to slide to 4.4%. Still, as renters have been seeking affordability, studio rents have appreciated faster than larger units over the last seven months. The median rent of studios was $1,463, down by $1 compared to last month. Nevertheless, it is up by $62 (4.4%) year-over-year and $209 (16.7%) higher than three years ago–a significant jump that is only slightly smaller than that seen in larger units.

To read the full report, including more data, charts and methodology, click here.