Rent Prices vs. Income: The Most and Least Affordable Cities for Renters in 2023

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  Written by Jaime Dunaway-Seale

Rent Prices vs. Inflation | Rent Prices vs. Income | Rent Price Changes by Metro: 2009-2021 | Rent Price Changes by Metro: 2022-2023 | Where Rent Outpaced Income | Rent Prices vs. Population Growth | Where Income Outpaced Rent | Rent-to-Income Ratios by Metro | Changes in Rent-to-Income Ratios

Inflation may be slowing, giving consumers a small reprieve from expensive food and gas prices, but rent remains stubbornly high.

Rent has risen exponentially since the pandemic, contributing to high inflation and squeezing Americans financially. But that’s nothing new. Rent prices have grown faster than inflation and income over the past four decades.

Since 1985, rent has increased 208%, while inflation has climbed 149%. If rent prices grew at the same rate as inflation, the median U.S. rent would cost 19% less — just $939 a month instead of $1,163.

Rent price growth first exceeded inflation in 2001, when a short recession squashed demand and lowered the inflation rate. The gap widened again during the Great Recession of 2008, and a decade of underbuilding spawned today’s affordable housing crisis.

The U.S. is short about 600,000 rental units and needs to build 4.3 million more to meet demand by 2035. While inventory remains low, fierce demand for housing will likely keep rent prices elevated for struggling tenants.

Americans’ annual income has leapt 194% since 1985, but wages still lag behind rent growth by 7%. What’s more, dramatic shifts in the labor market have caused wages to grow inconsistently.

Since 1985, wages have increased at an average rate of 5.4% per year, but since 2011, growth has slowed to 4.2% per year on average. If adjusted for inflation, income has grown just 18% in the past decade — about 2% each year — making it difficult for Americans to afford skyrocketing rent.

To determine how rent, income, and inflation impact American tenants, we analyzed publicly available data from the U.S. Census Bureau, the Federal Reserve Bank of St. Louis, and the Consumer Price Index.

Read on to learn if renters can expect relief from punishing rate hikes anytime soon.

U.S. Rent Prices Have Exceeded Inflation by 40% Since 1985

Rent prices have outstripped inflation over the past four decades, but they actually grew at comparable rates until about 2000. Since then, the gap has widened nearly every consecutive year, even at times of historic inflation.

The greatest divergence occurred in 2010 to 2011, during the worst years of the Great Recession. Many Americans lost their homes to foreclosure and became renters, creating more competition for units and, thereby, driving rental prices higher. 

The divide widened considerably again in 2020 to 2021 as Americans became more mobile and new household formation increased following pandemic lockdowns. At the same time, worker and material shortages delayed new apartment construction, causing a classic case of low supply and high demand that increased rent prices rapidly.

Now, the gap between rent prices and inflation is as wide as it’s ever been. Rent exceeded inflation by 40% in 2021, the last full year for which data is available.

In the post-pandemic era, rent and inflation have ballooned to near record levels. Although inflation has shown signs of slowing, it’s proven difficult for policymakers to decrease because the apartment shortage is keeping rent prices high.

Rent prices, as well as other shelter costs, remain one of the primary drivers of inflation because they make up the largest segment of the Consumer Price Index, the most well-known indicator of inflation.

Until rent prices decline, inflation will likely remain at an elevated rate.

Income Has Outpaced Inflation Since 1985 but Still Lags Behind Rent Growth

Workers are currently enjoying a period of high wages and rapid wage growth as employers aim to attract and retain top talent amid a post-pandemic labor shortage.

Unfortunately, high labor costs may fuel rampant inflation as employers pass increased costs to consumers. The inflation rate is 7x higher than it was in 2020, minimizing the impact of income increases for working Americans.

Inflation has exceeded income for 22 consecutive months, but historically, income has actually outpaced inflation by about 31% since 1985.  

Americans’ incomes have leapt significantly since then — growing 194% from $18,700 in 1985 to $55,000 in 2021 — compared to inflation’s 149% growth.

Americans may have more money to spend on housing, but wage gains haven’t kept pace with rent price growth in the long or short term. From 2020 to 2021, rent jumped 6% while wages grew 4.5%.

Overall, changes in income have been much more volatile than changes in rent — suggesting that Americans’ ability to afford rent depends on the strength of the job market and the economy at any given time.

Rent Price Changes in the 50 Largest U.S. Metros: 2009 to 2021

From 2009 to 2021, the median monthly rent price in the U.S. climbed 42% from $817 to $1,163, according to the U.S. Census Bureau.

Rent hikes are even more striking in America’s largest metro areas. In half of the 50 most-populous cities, rent growth surpassed the median U.S. increase of 42%.

What’s more, rent increased by at least 60% in seven U.S. cities in this 12-year span:

1. San Jose, CA (85%)
2. Denver, CO (82%)
3. Seattle, WA (81%)
4. Portland, OR (72%)
5. San Francisco, CA (71%)
6. Nashville, TN (62%)
7. Austin, TX (60%)

San Jose experienced the largest jump in rent, which soared to $2,511 a month in 2021. For San Jose renters, that’s almost double the $1,360 they paid in 2009.

Rent Price Changes in the 50 Largest U.S. Metros: 2022 to 2023

Rent soared in the aftermath of the pandemic, increasing 17% from 2021 to 2022 as Americans priced out of the expensive housing market continued to rent.

Although everything seems more expensive than it was a year ago, the good news for tenants is that rent price growth is finally starting to slow. Thanks to new apartment construction that’s increasing supply, rent jumped just 7% from 2022 to 2023, according to Zillow.

During that time, rent rose less than 7% in two-thirds of the 50 most-populous metros, and less than 4% in seven metros. Rent actually declined in Las Vegas — dropping 1% from $1,807 a month in 2022 to $1,789 a month in 2023.

The seven cities with rent increases under 4% from 2022 to 2023 are:

1. Las Vegas, NV (-1%)
2. Phoenix, AZ (1.1%)
3. Sacramento, CA (1.9%)
4. Baltimore, MD (2.6%)
5. New Orleans, LA (2.7%)
6. San Francisco, CA (3.7%)
7. Austin, TX (3.8%)

But not all renters are feeling financial relief. Rent growth remains particularly high in Louisville, where the monthly cost climbed 10% from 2022 to 2023.

Six cities experienced rent increases of 9% or more in the past year alone:

1. Louisville, KY (10%)
2. Cincinnati, OH (9.9%)
3. Indianapolis, IN (9.8%)
4. Miami, FL (9.6%)
5. Buffalo, NY (9.1%)
6. Kansas City, MO (9%)

However, the data suggests that some renters are starting to balk at high prices and massive hikes. In all seven cities where rent grew the most from 2009 to 2021, rent price increases were less than the U.S. average of 7%.

Rent Prices Outpaced Income in 92% of the 50 Most-Populous Metros: 2009 to 2021

Income has historically kept pace with rent prices, but wages declined sharply in the aftermath of the Great Recession, and it took roughly a decade for them to recover. After finally overtaking rent in 2019, income took another hit from the pandemic just a year later.

While wages have grown slowly, rent has been on a steady uphill trajectory — especially in America’s major cities. It’s no wonder rent prices eclipsed income growth in 46 of the 50 most-populous metros from 2009 to 2021.

Rent prices have exceeded income by more than 50% in seven U.S. metros:

1. Denver, CO (71%)
2. Las Vegas, NV  (57%)
3. Charlotte, NC (56%) 
4. Seattle, WA (55%)
5. Atlanta, GA (53%)
6. Portland, OR (51%)
7. Nashville, TN (51%)

Rent Eclipsed Income Most Frequently in High-Demand Markets

Rent growth is caused by a number of factors, including inflation, inventory, and zoning regulations. In addition, population migration is also an important component. 

When rent outpaced income at a high rate from 2009-2021, population growth during that time frame also skewed high.

In all seven cities where rent exceeded income by more than 50% from 2009 to 2021, the population grew by at least 1,500% — compared to the average U.S. growth rate of 1,362%.

In Charlotte, where rent outpaced income at the third-highest rate, the population grew 2,446% — the most of any city we studied.

Income Has Outpaced Rent in Only Four U.S. Cities Since 2009

Rent prices have exceeded income in most areas of the country, but in some cities, wages have managed to keep pace with rent growth.

Income has actually outpaced rent in just four major U.S. cities since 2009:

1. Providence, RI
2. Buffalo, NY
3. Cleveland OH
4. Pittsburgh, PA

Rent prices increased more slowly in these four cities, in part, because low population growth cooled demand for apartments. Although these cities experienced positive net migration, they grew at a slower rate than in other cities where rent prices soared.

From 2009 to 2021, the population did not grow by more than 1,500% in any of these four cities.

Low growth and diminishing demand has the same effect on the housing market, resulting in lower home prices. With well-paying jobs, residents in these cities can afford to save and buy homes, which in turn, reduces competition in the rental market and keeps costs low.

It’s no coincidence that in Pittsburgh, the city with the smallest population growth and cheapest home prices, that rent is the third-lowest in the country at just $892 a month.

Rent-to-Income Ratios in the 50 Largest U.S. Metros: 2021

Housing has always been one of the largest expenses Americans pay each month, but with accelerating rent prices, tenants are forced to shell out a greater share of their income on rent. 

Americans spend roughly 20% of their gross monthly income on rent, well below the 30% experts recommend.

But high costs in urban areas mean city-dwellers tend to spend more of their income on housing. The rent-to-income ratio (RTI) exceeds the national median in 21 of the 50 most-populous metros.

Miami has the highest rent-to-income ratio at 28.5%. Miami residents spend $1,492 a month on rent — 28% more than the national median — while earning 9% less than the national median income.

Rent is most affordable in Cincinnati, where residents earn 2% more than the national median income and pay 22% less than the national median rent. The average Cincinnati resident spends just $906 a month on rent, which is 15.5% of their gross monthly income.

Pittsburgh, St. Louis, Minneapolis, and Buffalo round out the five most affordable metros to rent, with rent-to-income ratios below 17%.

Overall, rent-to-income ratios tend to remain low in areas that have not experienced significant population growth. Across the 10 metros with the lowest rent-to-income ratios, population increases never reached 1,500% from 2009 to 2021.

In Two-Thirds of U.S. Cities, the Rent-to-Income Ratio Increased More Than the National Average: 2009 to 2021

In a perfect world, the rent-to-income ratio would remain constant year over year as income and rent grow proportionally. Unfortunately for tenants, that’s seldom the case. 

From 2009 to 2021, the rent-to-income ratio increased in 46 of the 50 most-populous metro areas in the United States. In 33 of those metros, the rent-to-income ratio grew more than 5.8% — the median increase across the U.S.

The rent-to-income ratio surged the most in Denver, followed by Seattle — two cities where recreational cannabis consumption was first legalized, increasing demand for housing among marijuana migrants from other parts of the U.S.

In Denver, the rent-to-income ratio climbed from 17% to 21% — a 23% increase over 12 years. During that same time period, the rent-to-income ratio increased 19% in Seattle.

Tenants looking for an up-and-coming city that is still affordable will find a haven in Milwaukee. Among metros where the rent-to-income ratio increased, Wisconsin’s capital had the smallest gain at just 0.6%.

The rent-to-income ratio decreased in only four cities: Cleveland, Pittsburgh, Buffalo, and Providence. Not surprisingly, these are the same four metros where income gains outpaced rent increases.

In Providence, income outpaced rent by 21% — the highest percentage among these four cities. As a result, Providence experienced the greatest dip in the rent-to-income ratio, which decreased 4.4% from 2009 to 2021.

Methodology

For a measure of historical nationwide income, we use the St. Louis FRED’s Real Median Income measure. For historical nationwide rent prices, we use the U.S. Census Bureau’s American Community Survey Median Household Income measure, which dates back to 2009. For median rent values dating before 2009, we use the St. Louis FRED’s CPI Rent Index to approximate rent values back to 1985.

To measure population changes and income by metro area, we use median household income and population data provided by the U.S. Census Bureau’s American Community Survey Median Household Income and Population measurements. This dates from 2009 to 2021, the most recent year for which full data is available. When comparing rent prices to income, all comparisons are made from the most recent median income data from 2021.

For an overall historical measure of inflation, we use the Consumer Price Index for All Urban Consumers: All Items, which measures the average monthly change in the price of goods and services paid by urban consumers between any two time periods. CPIAUCSL data is available through the Federal Reserve Bank of St. Louis.

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