Inflation Is Hitting Renters Harder Than Homeowners

Inflation is hitting renters harder than homeowners, according to a new analysis from Chandan Economics.

The firm eyed Bureau of Labor Statistics data and found that the adjusted CPI inflation rate for renters was 7.8% in October, while the adjusted CPI inflation rate for fixed-rate homeowners totaled just 5.6% over the same period.

“While both renters and homeowners are still experiencing higher-than-average inflation levels, the spread between the two has never been wider than today,” Chandan’s Jonathan O’Kane writes. “Between 2014 and 2020, the personal inflation rate for renters averaged 1.1 percentage points higher than for fixed-rate homeowners. Moreover, this differential remained consistent, never dropping below 0.9 percentage points or rising above 1.2 percentage points. As of the October 2022 observation, this spread has increased up to 2.2 percentage points.”

O’Kane also says inflation for renters should hold higher for longer, since CPI changes for rent often lags market pricing. That will in turn create “more substantial inflation spreads” between renters and holders of fixed rate mortgages.

Rents have grown 36.9% over the last five years nationally, while the average wage is up only 23%, according to research from Zillow. And in cities like Miami, the typical renter needs to work three full-time days more than they did five years ago to earn enough to pay the typical rent in that metro area.

But “in the months ahead, assuming the Federal Reserve is successful in its effort to regain control over price stability, the personal inflation rates for renters and homeowners alike should continue to fall, as they have in recent months,” Chandan’s O’Kane predicts.