If sending in your rent check is painful, you’re not alone: American renters — especially those in major cities like New York, Los Angeles and Chicago — spent a staggering amount on housing in 2017.
Collectively, American renters paid a total of $485.6 billion in 2017, up $4.9 billion from the $480.7 billion in 2016. That’s according to an analysis by Zillow, a real estate and rental website. Renters in Las Vegas, Minneapolis and Charlotte felt that increase the most. In each of those cities, rent rose more than 7% since 2016.
One reason: It’s never been a better time to be a landlord. Rental income as a share of gross domestic product hit an all-time high in the first quarter of 2017, according to the U.S. Labor Department due to high demand and limited housing supply.
That dynamic makes it tough for renters, who often can’t become homeowners because of factors including unemployment, stagnant wages and strict underwriting, which makes them unable to be approved for mortgages.
High housing costs make it difficult for Americans to allocate their paychecks to other things, including savings and investments. And all that rent means they face an uphill struggle saving for a deposit.
The average rent for a one-bedroom apartment ranges from $830 per month in places like Houston and San Antonio to more than $2,000 per month in New York, San Diego and San Jose, according to an analysis of Apartmentlist.com.
The median U.S. rental now requires 29% of median monthly income, according to Zillow. Between 1985 and 2000, renters spent about 25.8% of their income on housing. Financial experts say people should not pay more than 30% of their salary on housing, but that’s no longer feasible for many Americans.
But there have been signs of improvement. The cost gap between renting and buying is widening as rents stabilize and home prices rise, a separate study released this month by Realtor.com found. In 57 of the top 59 largest metros in the U.S., it makes more sense to buy based on simple monthly costs relative to income.
(Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
“The easing of rental demand is a reflection of consumer confidence driving interest in home ownership,” Javier Vivas, director of economic research for Realtor.com, said in a statement. “Over the last few years, many potential home buyers have seen their incomes accelerate, jobs solidify and family size increase, which has intensified their urgency to enter the market.”