The national rent-to-income (RTI) ratio has been falling for five quarters, dropping to 27.6% in the fourth quarter of 2024, according to Lu Chen and Mary Le at Moody’s. This share was most recently seen during the pandemic, but before that jarring event, a level that would have been common in 2014.
Housing affordability has become a widespread problem in the U.S. Millions of households, whether owning or renting, spend more than 30% of their income on shelter and are considered financially burdened.
The current drop in RTI is the result of higher house inventory and wages, Moody’s said. Currently, year-over-year income growth is 3.6%. Compared with three months prior, Q4 median household income rose by 0.9%, passing the typical 0.2% quarterly increase in asking rents. Rent growth year-over-year was 0.7%. Should the trends continue, that would further lower the rent burden.
Recommended For You
Further analysis by Orphe Divounguy, senior economist at Zillow, noted that affordability remains a challenge for many, particularly first-time homebuyers. But they currently have the “strongest bargaining power” in five years. Even with higher mortgage rates, existing and new home sales topped expectations in November and December.
A sustained increased housing supply has helped improve affordability. Zillow predicts that home values will grow by only 0.9% in 2025. They also expect 4.11 million existing home sales, an improvement over the 30-year low in 2024.
Still, the top eight rent-burdened metros in the U.S. were all at or above the 30% rent burden threshold. The areas were New York (58.5%), Miami (37.6%), Fort Lauderdale (33.8%), Los Angeles (33.0%), Northern New Jersey (31.4%), Boston (31.3%), Westchester (30.4%), and Palm Beach (30.0%). Miami, Northern New Jersey, and Westchester still experienced rent growth that outpaced income growth. The other five saw some year-over-year improvement. Slower rent growth may not be enough to reverse trends. New York City had 2.2% income growth and slightly negative rent growth, keeping the rent burden high.
Where the affordability gap is pronounced is, as one might expect, where house prices have risen substantially faster than income growth. In Miami, there’s been 8.9% rent growth since the end of 2022 but only an 8.5% increase in income. Many California high-earners have moved to more affordable areas, lowering the state’s median household income. Also, technology and healthcare layoffs in California put further downward pressure on median household incomes.
Median household income rising to $75,713 hasn’t been able to offset monthly mortgage payments at even 6.6% rates. However, in such Texas metros as Austin, San Antonio, and Dallas, income growth outpaced housing prices and rent growth, taking some pressure off consumers.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
