Rents have finally stopped skyrocketing. They're now stuck at a price most Americans can't afford.

By Aarthi Swaminathan

Renters should 'brace themselves for a prolonged affordability crisis until incomes increase,' housing economist says

Renters have some good news and some bad news.

The good news is that after two years of fast-rising rents, rent growth is slowing, so re-signing your current lease or a new one won't necessarily translate into a big jump in housing costs.

The bad news is that rents are now stuck at a level that many Americans can't afford.

Rent growth has returned to a "typical" pattern of annual increases, according to an analysis by researchers at Florida Atlantic University, Florida Gulf Coast University, and the University of Alabama. In February, rents nationwide rose 3.5% on a year-over-year basis, the researchers' Waller, Weeks and Johnson Rental Index found. The average price for rental units nationwide was $1,959.

"A rental increase of between 3 and 5% is seen as normal, so these numbers suggest that the rental crisis is over in most parts of the country," Ken Johnson, a real estate economist with FAU's College of Business, said in a statement.

To be sure, rents are growing in parts of the North and the Midwest, Johnson said, "but the growth is nowhere near as rapid as years prior." At the end of the coronavirus pandemic between 2021 and 2023, rents skyrocketed, with renters seeing over 15% hikes, according to data from Apartment List.

"All in all, this suggests that rent appreciation is cooling and rental markets around the country are beginning to normalize," Johnson added.

But that doesn't mean rent prices are becoming more affordable. On the contrary, renters "should brace themselves for a prolonged affordability crisis until incomes increase to compensate for rising rents," the researchers said.

A record share of renters in the U.S. are spending more than 30% of their income on housing, which is considered too much. In some states, such as Florida, 54% of renter households are cost-burdened, meaning that their rent expenses take up too much of their income, according to the Atlanta Fed's rental-affordability tracker.

Housing is generally considered affordable if it costs no more than 30% of one's gross income. But in 10 metro areas, households need to make "well over $100,000 to avoid paying more than 30% of their income to rent," the researchers said.

The real median household income was $74,580 in 2022, according to the U.S. Census Bureau. Data from the agency showed that 38% of households made more than $100,000 a year.

Using the average rent in each city, according to the researchers' index, and assuming that a renter household would spend only 30% of income on rent, MarketWatch calculated the gross income over 12 months required to rent in the most expensive cities in the U.S.

   City                    Average Rent  Household Income required 
   San Jose, Calif.        $3,222.72     $128,908.80 
   San Francisco, Calif.   $2,993.80     $119,752.00 
   New York, N.Y.          $3,157.65     $126,306.00 
   Oxnard, Calif.          $2,956.98     $118,279.20 
   San Diego, Calif.       $2,935.33     $117,413.20 
   Boston, Mass.           $3,046.98     $121,879.20 
   Los Angeles, Calif.     $2,891.26     $115,650.40 
   Miami, Fla.             $2,717.61     $108,704.40 
   Bridgeport, Conn.       $2,664.20     $106,568.00 
   Urban Honolulu, Hawaii  $2,631.78     $105,271.20 

Source: Waller, Weeks and Johnson Rental Index

For renters struggling with housing costs, the bad news is that rents won't come down.

Instead, incomes "need to rise to match current rents," the researchers said, "so renters can no longer feel the sting of the affordability crisis."

How have rent increases affected you? We want to hear from readers who have stories to share about the effects of increasing costs and a changing economy. If you'd like to share your experience, write to readerstories@marketwatch.com. A reporter may be in touch.

-Aarthi Swaminathan

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04-20-24 0759ET

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