Cost-of-living concerns are top of mind amongst Americans while rent-to-income ratios (RTI) remained elevated in Q1, according to Moody’s Analytics US State of Rent Burden report and data interactive tool. While seasonal slowness and rising multifamily inventory moderated rent growth, the number of US primary metros still experiencing higher rent burdens plummeted from 49 metros down to only five, a 91% drop from Q4 2022 to Q1 2023. RTI – the percentage of gross income a median-income tenant pays for the average monthly rent – finally cooled after more than three years of steepening rates nationwide.

“The fever is finally breaking. Since Q4 2019, 82% of metros had higher rent-burdens compared to pre-COVID because rent disproportionately rose faster than incomes,” wrote Lu Chen, Senior Economist, and Mary Le, Economist, Moody’s Analytics. “Rising mortgage rates caused many households to be priced out from homebuying and would-be buyers to remain renters. Apartment demand surged as a result and drove rates sky high. The vast majority (91%) of all metros finally caught a break from growing rent burdens in Q1, as rent growth moderated or even declined given affordability pressures and slowing migration. However, we are not quite at an inflection point yet.”

Even with this near-term relief, the cost of shelter remains significantly elevated relative to wages when compared to past decades. In 1999, just one metro was rent-burdened: New York City, with the median NYC household allocating 53.5% of their income to the average-priced apartment. Today, seven US metros fall within this designation: NYC (now 66.9% RTI), Miami (42%), Fort Lauderdale (36.8%), Los Angeles (34.7%), Palm Beach (34.2%), Northern New Jersey (33%), and Boston (32.8%).

COVID-19 only exacerbated this issue. NYC’s RTI increased 8.4% between Q4 2019 and Q1 2023. Many metros followed suit, forcing several to become “rent-burdened”, meaning the typical household pays 30% or more of their income to rent. In Q4 2022, the US became “rent-burdened” nationwide for the first time in nearly 25 years of Moody’s Analytics tracking history.

“As wage growth trails behind the cost of shelter, Americans are feeling financially distressed,” continued Chen and Le. “With rent growth projected to hover around 2% annually, national RTI will stay mostly flat for the year (29.7%). That is still uncomfortably elevated and only trailing behind last year’s broken record.”

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