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Low-Income Renters Struggle to Afford the Least Expensive Apartments

Housing affordability is a critical issue for low-income renters, many of whom do not have any emergency savings

- Rent growth at the lower end of the market outpaced income growth in nearly all major metros.

- Most renters don't have enough savings to cover three months of living expenses in an emergency.

- Renters whose incomes are the bottom third of all incomes earn less than $30,000 annually in 24 of the largest 25 U.S. metros.

Aug 29, 2017

SEATTLE, Aug. 29, 2017 /PRNewswire/ -- Renters who earn the least cannot afford even the cheapest market-rate rentals in the nation's largest metro areas, according to a Zillow® analysis of multifamily rents and Census income data.

The rent affordability crisis is especially tough for the lowest-earning Americans. A common rule of thumb is that people shouldn't spend more than 30 percent of their income on housing, allowing them to save for emergencies and afford other expenses. In the largest 25 metros in the United States, the typical rents require a much larger share than that recommended amount for renters whose incomes fall into the bottom third of the income distribution, even when they are looking at the cheapest apartments on the market.

Spending such a significant portion of income on rent means making other financial sacrifices. Putting aside money for an emergency is a luxury many renters don't have – 68.8 percent don't have enough savings to cover three months of living expenses. Instead, the main financial concern for most renters is affording basic bills, like food, utilities, and gasoline, in addition to the renti.

From 2011 to 2016, rents increased much more than incomes did, and this is especially evident at the lower end of the market. Even in markets where lower incomes saw significant gains, rents in those markets saw much bigger jumps. For example, the monthly earnings among the lowest third of incomes in San Francisco increased by about $485 between June 2011 and June 2016, but over that same time period, apartment rents grew $1,145.

"Any renter can tell you how difficult it is to save up extra cash while spending an increasing portion of their income on rent, but it's much worse for those who make the least," said Zillow Chief Economist Dr. Svenja Gudell. "Income inequality is growing in the United States, and this shows how high housing costs contribute to preventing people from moving up the ladder. There are several factors at play here, including wage growth dampened by the recession and increased demand on the rental market. Without a long-term solution to affordable housing, the gap between the haves and have-nots will continue to widen."

The median rent for apartments in the least expensive third of the market required more than 100 percent of the typical income for the lowest-earning people who live in Los Angeles. People who are unable to get a housing subsidy likely must double up or move further from their jobs to find more affordable rents.

Data in the following chart is all for the bottom third in June 2016.

Metropolitan Area

 Median
Income

Income
Change
2011-2016

 Multifamily
ZRIii

Multifamily
ZRI 5-Year
Change

Percent
of Income
Needed
for Rent

New York/Northern New Jersey

$20,740

n/a

$1,932

n/a

111.8%

Los Angeles-Long Beach-Anaheim, CA

$21,570

12.9%

$1,937

60.2%

107.8%

Chicago, IL

$21,777

13.4%

$1,167

24.3%

64.3%

Dallas-Fort Worth, TX

$24,266

17.9%

$996

30.7%

49.3%

Philadelphia, PA

$22,088

16.3%

$1,055

24.6%

57.3%

Houston, TX

$22,399

12.0%

$1,216

64.5%

65.1%

Washington, DC

$36,295

6.8%

$1,525

21.9%

50.4%

Miami-Fort Lauderdale, FL

$17,629

10.2%

$1,443

37.7%

98.2%

Atlanta, GA

$22,814

18.8%

$896

28.6%

47.1%

Boston, MA

$25,510

18.1%

$1,839

40.8%

86.5%

San Francisco, CA

$28,621

25.5%

$2,382

92.6%

99.9%

Detroit, MI

$18,666

16.7%

$746

21.5%

48.0%

Riverside, CA

$20,740

12.1%

$987

19.3%

57.1%

Phoenix, AZ

$20,740

6.9%

$893

41.3%

51.7%

Seattle, WA

$29,036

20.0%

$1,249

50.7%

51.6%

Minneapolis-St Paul, MN

$27,066

13.2%

$1,075

48.7%

47.7%

San Diego, CA

$24,888

18.5%

$1,704

59.7%

82.2%

St. Louis, MO

$21,155

17.5%

$ 679

8.8%

38.5%

Tampa, FL

$18,666

13.1%

$919

32.8%

59.1%

Baltimore, MD

$25,749

16.0%

$1,030

11.5%

48.0%

Denver, CO

$27,999

21.7%

$1,141

57.4%

48.9%

Pittsburgh, PA

$19,392

8.3%

$806

22.5%

49.9%

Portland, OR

$24,888

21.4%

$1,185

67.8%

57.1%

Charlotte, NC

$20,533

14.1%

$853

29.8%

49.9%

Sacramento, CA

$21,155

10.2%

$1,154

57.0%

65.5%

Zillow 
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

i https://www.zillow.com/research/financial-hardship-widespread-16140/  
ii The multifamily Zillow Rent Index (ZRI) is the median Rent Zestimate® (estimated monthly rental price) for a given geographic area on a given day, and includes the value of all apartments in Zillow's database, regardless of whether they are currently listed for rent. It is expressed in dollars. 

 

SOURCE Zillow

For further information: Lauren Braun, Zillow, press@zillow.com