Renters Gain More ‘Elbow Room’ as U.S. Rent Growth Slows

Because wage growth has outpaced rent increases, renters are breathing easier, according to the latest Zillow Observed Rent Index. Further, the average household now has an extra $193 per month—an additional $2,318 annually for gas and groceries, or a head start on a down payment.

At $1,910, the average asking rent increased by just 1.8% annually, the slowest rate since 2020. While multifamily rentals increased 1.3% to $1,757, single-family rents increased 2.5% year-over-year to $2,225, the slowest yearly growth ever noted in Zillow’s data series. Rent rise is outpacing income growth in both sectors, relieving the financial strain that tenants have been under since the pandemic-era spike.

Although the amount varies by market, the savings are realized nationwide. After accounting for wage growth and rent reductions, renters in Austin are experiencing the most annual increases, with around $3,182 more than a year ago. Renters in Tampa come in second at $3,110 a year, followed by Denver at $3,002. Renters are winning even in more expensive markets: Renters in Los Angeles have an extra $2,438 annually. The boost is less substantial at $458 per year in San Francisco, where rents have increased dramatically.

Key Findings:

• The typical asking rent is $1,910 in March, up 0.6% month-over-month. The pre-pandemic average month-over-month change for this time of year is 0.7%
• Since the beginning of the pandemic, rents have increased by 36.2%
• Rents are now 1.8% up from last year
• Rents are up from year-ago levels in 37 of the 50 largest metro areas. Annual rent increases are highest in San Francisco (6.4%), Virginia Beach (6%), Chicago (5.6%), Providence (4.9%), and San Jose (4.8%)
• The median household would spend 26.5% of their income on a new rental in March
• Rent affordability is flat month-over-month in March. The pre-pandemic share of median household income spent on rent was 25.8%
• Rent affordability is now 0.4ppts down from last year
• The most affordable metro areas for rents are Austin (18.1%), Salt Lake City (18.2%), Raleigh (18.4%), Minneapolis (19.5%), and Denver (19.5%)
• The least affordable metro areas for rents are New York (38.0%), Miami (37.4%), Los Angeles (33.9%), Riverside (31.0%), and Boston (30.1%)
• Income needed to afford rent increased by 1.7% year-over-year in March to $76,417. Since pre-pandemic, the income needed to afford rent has increased by 35.4%

Renter Activity, Savings & Opportunity

Per the report, affordability is starting to rebound and return to historical levels. The median household’s usual rent expenditure as a percentage of income has decreased to 26.5%, which is closer to the pre-pandemic level of 25.8% than it was a year before. However, to comfortably afford the average rental, a household must make about $76,400 annually, which is 35% more than what was needed prior to the pandemic.

At the same time, some prospective first-time buyers are considering rentals due to affordability issues in the for-sale market. Nearly 1 in 13 for-sale customers are simultaneously looking at rentals, according to recent Zillow research. For the properties these dual shoppers are examining, owning is roughly $415 more expensive per month than renting. Renting is frequently the more flexible and cost-effective alternative for households considering their options.

Additional Key Findings:

• The typical asking rent for single-family homes is $2,225 in March, up 0.5% month-over-month. Since the beginning of the pandemic, single-family rents have increased by 44.9%.
• Single-family rents are now up 2.5% from last year.
• Single-family rents fell, on a monthly basis, in 3 major metro areas. The largest monthly drops in single-family rents are in Baltimore (-0.2%), Richmond (-0.1%) and Minneapolis (-0.1%).
• Single-family rents are up from year-ago levels in all 50 of the largest metro areas. Annual single-family rent increases are highest in Providence (7.3%), Milwaukee (5.8%), Boston (5.6%), Buffalo (5.3%), and Cleveland (5%).

Multifamily Trends:

• The typical asking rent for multifamily homes is $1,757 in March, up 0.6% month-over-month. Since the beginning of the pandemic, multifamily rents have increased by 28%
• Multifamily rents are now up 1.3% from last year
• Multifamily rents are up from year-ago levels in 33 of the 50 largest metro areas. Annual multifamily rent increases are highest in Virginia Beach (6.5%), San Francisco (6.1%), Chicago (5.5%), San Jose (4.8%), and Providence (4.6%)

Rent Concessions:

• 39.8% of rentals on Zillow offered concessions in March.
• The share of rental listings offering concessions increased by 0.6ppts month-over-month in March.
• The share of rental listings offering concessions ia flat compared to last year
• The share of rentals with concessions is lower, on a monthly basis, in 17 major metro areas. The largest monthly drops in the share of rentals with concessions are in Milwaukee (-2.9ppts), San Francisco (-2.3ppts), Salt Lake City (-1.7ppts), Minneapolis (-1ppts), and Kansas City (-0.8ppts)
• The share of rentals with concessions is higher, on a monthly basis, in 33 major metro areas. The largest monthly increases in the share of rentals with concessions are in Indianapolis (4.3ppts), New Orleans (3.8ppts), Memphis (3.7ppts), Virginia Beach (2.7ppts), and San Antonio (2.6ppts)
• Rent concessions are up from year-ago levels in 30 of the 50 largest metro areas. The annual increase in share of rental listings with concessions is highest in Tampa (12ppts), Birmingham (8.9ppts), Las Vegas (8.5ppts), Boston (7.5ppts), and Columbus (7.4ppts)

To read the full report, click here.