Dive Brief:
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Residents in New York and Miami pay more than half of their monthly income on rent — at 58% and 54%, respectively — according to a study by property management software company AppFolio using Axiometrics data.
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Los Angeles (47%), San Francisco (46%) and Boston (45.5%) rounded out the top five metros where rents take a disproportionately large share of income.
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The study, which considered average monthly household income and the average monthly rent for a one-bedroom unit, put Las Vegas, Indianapolis and Phoenix as the most affordable of large U.S. cities with rent taking a 20%, 21% and 22% share of typical incomes there, respectively.
Dive Insight:
Rents across U.S. metros continue to rise as demand outpaces supply, driven in part by surging home prices that are keeping many potential buyers on the sidelines while robust labor markets have helped attract a growing number of young professionals into many urban cores.
A U.S. Census and Consumer Expenditure Survey found that rents shot up 28.7% from 1970 to 2010, while incomes grew just 13.8%. It also found that the number of renters spending more than half of their income on rent increased by more than half to 11.4 million between 2001 to 2014.
With rents rising faster than incomes, many first-time buyers, in particular, are struggling to save enough money for a down payment, forcing them to seek other options, such as renting or living with family. Driven by elevated home prices on the back of tight inventory, the U.S. homeownership rate is trending close to a 51-year low, with the share of first-time buyers dipping slightly from 35.2% in the third quarter of 2016 to 34.7% in the fourth quarter.
AppFolio noted that cities in the Midwest are also facing rapidly increasing rents due to a lack of available stock, with residents in the Minneapolis–St. Paul market spending 29% of their income on rent. Denver and Indianapolis have also recently seen higher rents due to growing employment there.
The Midwest is seeing a wave of in-migration, particularly among millennials, as they — and their employers — are attracted to the region's robust job centers and general housing affordability.
Conversely, residents in San Francisco, which has consistently been at or near the top of many hot property lists of late, are seeing rents come down as demand is dented by slower job growth, according to AppFolio.
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