New Study Analyzes Changes in Rent-to-Income Ratios of 100 Major Cities Over Time

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Jul 22, 2024, 08:32 ET

GAINESVILLE, Fla., July 22, 2024 /PRNewswire/ -- In a new study by BadCredit.org, researchers set out to find where the age-old financial recommendation to 'spend no more than 30% of your income on rent' is feasible around the nation, according to trends in rent-to-income ratios.

They analyzed two key metrics: median annual earnings and average monthly rental rates in 100 major U.S. cities. They found the average rent-to-income ratio in each city based on the proportion of income going toward rent over the past five years.

The 20 Cities That Saw the Largest Changes in Rent-to-Income Ratio Over a 5-Year Period

Key Findings:

Rent is increasing faster than income. The rent-to-income ratio has increased from about 27.5% to 30.1% over five years.
Rent has increased by 32.6% over five years, while the median income has increased by only 20.8%.
In Miami, rent accounts for 54.9% of a person's income—the highest current rent-to-income ratio of any city analyzed. This has increased by 11% over the past five years.
In Tennessee, rent is also outpacing wages at high rates: Knoxville (8.18%) and Chattanooga (6.08%) rent-to-income ratios have increased by more than 5% in five years.
Wichita, KS has the lowest average rent-to-income ratio (19.5%). Wichita is the only city analyzed with an average rent still less than $1,000 per month.

Rent is not outpacing income growth in 16 cities. These are the five cities where resident's rent-to-income ratios have decreased most:

Louisville, Kentucky — The median income has increased by 31.1%, while rent has increased by just 8.8%.
San Francisco, California — Rent has gone up 7.3%, income has gone up 21.1%.
San Jose, California — Rent is up 8.1%, and income growth is up 17.5%.
Madison, Wisconsin — Rent is up 19.6%, and income is up 30.0%.
Little Rock, Arkansas — Rent increased by 27.3% and income by 35.3%.

"It's important to be realistic and forward-thinking," says Erica Sandberg, BadCredit.org Financial Expert. "If you know paying your monthly rent will be stressful, open yourself up to all financially healthy alternatives. Stop-gap measures, such as depending on credit cards to meet expenses, are temporary and can become another expensive burden."

Methodology

Researchers analyzed the median income for single earners from 2018 to 2022, according to the US Census. They compared that to the average rent for all homes (including apartments, single, and multi-family residences) each year over the same period, according to Zillow. To calculate the rent-to-income ratio, they multiplied the monthly rent by 12 and divided it by the median income. The five-year change is the difference between the 2018 and 2022 ratios.

About BadCredit.org

BadCredit.org is a leading financial resource dedicated to helping individuals and families make informed financial decisions. Through comprehensive research and expert advice, BadCredit.org provides valuable insight on personal finance, credit, and consumer advocacy.

For more information about the study and its findings, visit BadCredit.org.

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SOURCE BadCredit.org