If you follow the rule of thumb that households should spend no more than 30% of gross income on rent, then most U.S. cities are unaffordable.
A monthly NerdWallet rent-to-income ratio analysis of 225 cities in the United States finds that, in January, 64% of rents on the market are at or above the recommended 30% ratio.
That means market rents are moderately-to-severely burdensome for residents in 64% of U.S. cities measured. Market rent comes from the real estate website Zillow, and median income used for this analysis is from 2021 U.S. Census Bureau data. The data doesn’t differentiate between incomes for residents who own rather than rent in those cities.
By federal standards, spending 30% to 49% of income on rent means a household is “moderately rent burdened,” and spending 50% or more means a household is “severely rent burdened,” according to the NYU Furman Center, which conducts research about housing and urban policy.
Among the 225 cities analyzed, five have rent-to-income ratios that put renters with median incomes in the “severely rent burdened” category for January 2023, including:
Bridgeport, Connecticut: 69%
Trenton, New Jersey: 68%
Santa Maria, California: 61%
New York City: 54%
Renters with the greatest financial burden for housing tend to be seniors, low-income households, immigrants, and racial or ethnic minorities, according to a 2015 Zillow analysis of U.S. Census Bureau data.
Here are the cities with the least and most affordable rental housing markets, according to January 2023 rental market data from Zillow.
Are rents increasing or decreasing?
From December 2022 to January 2023, the price of advertised rents fell by less than 0.1%, according to Zillow’s rental report for January 2023.
Annual rent growth peaked at 17% in February 2022 since Zillow began tracking it in 2016 and has been slowly declining ever since. The city with the highest annual rent increase in January was Louisville, Kentucky, with an increase of 10.1% compared to January 2022. Las Vegas was the only city measured with a decline in rent — down 1% in January versus the same month last year.
Rent is one of the biggest contributors to how inflation is measured. Shelter, which includes rent, is the biggest portion (34%) of the consumer price index, a proxy for inflation.
But current inflation doesn’t necessarily reflect current market conditions, because of the lag in how rent data is reported. That’s due to the cycle of renewals for leases, most of which last around a year.
Even with that lag, the rent-specific portion of the consumer price index, or CPI, has outpaced overall inflation for decades.
Methodology: Rent-to-income ratios by metro area
NerdWallet pulled the most recent available market rental data for 495 cities from the Zillow Observed Rent Index and matched it with the most recent available median household income data (2021) for cities by the U.S. Census Bureau. Certain cities identified in the Zillow Observed Rent Index weren’t included in the U.S. Census Bureau list of median household incomes by city and thus weren’t included in this analysis. A total of 225 cities were identified by both sets of data. Then, NerdWallet calculated the rent-to-income ratio using the following formula: Market rent/(median rent/12 months).