February 2023 Rental Report: Rental Affordability Worsened From a … – Realtor.com News

In February 2023, the U.S. rental market experienced single-digit growth for the seventh month in a row after thirteenth months of slowing from January’s peak 16.4% growth. Median rent across the top 50 metros was up just 3.1% year-over-year for 0-2 bedroom properties. The median asking rent was $1,716, down by $1 from last month and $48 from the peak but is still $296 (20.8%) higher than the same time in 2020 (pre-pandemic). 

In February 2023, the rent growth of two bedrooms increased to 2.9%, marking the first acceleration after a whole year of slowing down. The median rent for two bedrooms was $1,890 nationally, $53 (2.9%) higher than the same time last year but still $57 lower than July’s peak. Even though rent growth for larger units has slowed the most relative to last year, larger units had the biggest premium over the past three years, up by $352 (22.9%).
Rent growth for one-bedroom went up and down on a year-over-year basis in recent months, reaching 4.4% in February 2023. In addition, February is the third straight month that we saw positive rent gains in one-bedroom on a monthly basis. In February, the median rent increased to $1,621, up by $10 compared to last month but still  $21 less from July’s peak. Nevertheless, it is still up by $69 (4.4%) compared to the previous year and $292 (22.0%) higher since February 2020.
In February, rent growth in studios continued to slide to 4.4%. Still, as renters have been seeking affordability, studio rents have appreciated faster than larger units over the last seven months. The median rent of studios was $1,463, down by $1 compared to last month. Nevertheless, it is up by $62 (4.4%) year-over-year and $209 (16.7%) higher than three years ago–a significant jump that is only slightly smaller than that seen in larger units.

While annual rent growth is cooling, affordability concerns are still rising. According to the most recent Fannie Mae’s National Housing Survey, nearly 89% of respondents believed home rental prices will not improve in the next 12 months, a more gloomy outlook than renters had by the end of 2022.1 In addition, 66% of respondents believed rental prices will go up in the next 12 months, the largest share since last summer. 
One approach to measuring rental affordability is the 30-percent rule of thumb. According to this principle, a household should spend no more than 30 percent of its income on housing costs. The U.S. Department of Housing and Urban Development (HUD) uses this approach. HUD defines cost-burdened households as those paying more than 30 percent of income on housing (including utilities) and severely cost-burdened households as those paying more than 50 percent of  income on rent (including utilities).
This report uses a rent share of income to measure rental affordability in February 2023. It compares the median monthly rents to the estimated median monthly household income. A higher value means that rental costs make up a more significant proportion of family income every month, indicating a relatively less affordable rental market. Meanwhile, a lower share implies a much healthier housing environment.2
In 2023, the average median monthly household income among the top 50 metros was $6,793 and the monthly median listed rent for rental units with 0-2 bedrooms was $1,716 in February, suggesting rents made up 25.3% of a typical household income. In February 2022 the rent-to-income share was 24.8%, showing that, for the median household, the nation’s rental affordability has worsened over the past year.
Looking ahead, it is important to note that uncertainties still exist. With the Federal Reserve’s monetary policy continuing to tighten, there is expected to be a sustained period of high mortgage rates. As a result, those looking to buy homes may end up renting for longer, keeping demand for rental properties high and driving up rental prices. In addition, if the Fed is unable to achieve its goal of a ‘soft landing‘, renters may once again face challenging circumstances due to high rent costs, inflation, and slow income growth.
In February 2023, 8 of the top 50 metros had a rent share higher than 30% relative to the median household income. The least affordable rental market was Miami, FL, followed by coastal or Sun Belts metros like Los Angeles, CA, New York, NY, San Diego, CA, Riverside, CA, Boston, MA,  Orlando, FL and Tampa, FL. 
In addition, affordability has worsened in 6 of the 8 markets as the current rent share of income is higher than this time last year. Specifically, families looking to rent with a typical household income in Miami, FL, would spend 42.3% of their monthly paycheck on the typical rental in February 2023, a hike of 2.1 percentage points over 12 months ago. Put another way, the median rent for a typical 0-2 bedroom unit in Miami, FL, is 1.4 times as high as its estimated affordable rent, which limits rent to just 30% of the current typical household income.
Meanwhile, Oklahoma City, OK, was the most affordable rental market in February 2023. Its median rent for a typical 0-2 bedroom unit only took up 58% of its estimated maximum affordable rent under the current median household income. Other affordable rental markets include Columbus, OH  Minneapolis, MN, Cincinnati, OH, and Kansas City, KS.  
Max Affordable Rent (Ratio)
Similar to our last report on rental affordability,  renters in big metros such as New York and Miami continue to face escalating affordability concerns. Meanwhile, significant affordability declines are no longer limited to expensive markets, as more affordable markets are now experiencing larger declines as well. During the past 12 months, Indianapolis’s rent share hiked from 20.0% to 22.1%, the share in Pittsburgh, PA jumped from 23.1% to 24.9%, and the share in Birmingham, AL increased from 20.4% to 22.2%. One reason behind the deteriorated affordability is the faster year-over-year rent growth occurred in these markets. In February 2023, New York, NY (12.2%),  Indianapolis, IN (11.8%) Birmingham, AL (9.4%), Pittsburgh, PA (7.6%) and Miami, FL (3.7%) all saw rental prices rise faster than the national average.  
Appendix:Rental Data – 50 Largest Metropolitan Areas –February 2023
Rental data as of February for studio, 1-bedroom, or 2-bedroom units advertised as for-rent on Realtor.com®. Rental units include apartments as well as private rentals (condos, townhomes, single-family homes). We use rental sources that reliably report data each month within the top 50 largest metropolitan areas. Realtor.com® began publishing regular monthly rental trends reports in October 2020 with data history stretching back to March 2019.
With the release of its February rent report, Realtor.com® incorporated a new and improved methodology for capturing and reporting more comprehensive rental listing trends and metrics. The new methodology is expected to yield a cleaner, more representative and more consistent measurement of rental listings and trends at both the national and local level. The methodology has been adjusted to better represent the true cost of primary housing for renters. Most areas across the country will see minor changes with a smaller handful of areas seeing larger updates. As a result of these changes, the rental data released since February 2023 will not be directly comparable with previous releases and Realtor.com® economics blog posts. However, future data releases, including historical data, will consistently apply the new methodology.
Rental affordability analysis: The affordable monthly rent is calculated by applying the 30% rule to the estimated 2023 monthly median household income nationwide ($6,793 across the 50 largest U.S. metros, on average) and in each metro. The monthly median household income is derived from the annual median household income data sourced from Claritas. Due to the methodology changes noted below, Realtor.com has made historical revisions to its prior affordability analyses. For our most recently published affordability analysis on August 2022 data published in September 2022, the national rent-to-income share has been updated to 26.2%. 
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