Rent Is Outpacing Wages the Most in These 9 Cities

Traditionally expensive cities like New York and Los Angeles are still experiencing the widest gap between what their residents earn every month and what they pay in rent—known as the rent-to-income ratio—according to a new report by Moody’s Analytics, despite slowing rent growth in recent months.

The rent-to-income ratio stood at 30.2 percent by the first half of 2023, with Moody’s saying that “spending 30 percent of income on rent is the new normal in many U.S. metros.” That means many American renters are what economists call “cost-burdened”—they spend a lot on rent and have less money to spend on health care and food, or to save for buying a home.

Things have actually gotten better for renters since the beginning of the year, with the six months from January to June seeing the rise of the cost of renting finally slowing after skyrocketing since 2020. In the past three years, the rental market has experienced a crisis that has unfolded at the same time as the housing market became increasingly unaffordable, partly as a consequence of it.

Last year, the rent-to-income ratio surpassed the 30 percent mark for the first time in 25 years of Moody’s tracking. After reaching a peak median of $1,777 nationwide in July 2022, rent has come down, but it remains much higher than it was in 2019.

In May, the national median asking rent was $1,739, down 0.5 percent from May 2022. In the following months, it was back up again, increasing 0.6 percent between May and June and 0.5 percent from June to July, according to Zillow.

So things have definitely started to look better, but renters are unlikely to be able to catch their breath. While there was a slowdown in the cost of rent, wages have struggled to keep up with rising prices in the past few years, and it will take some time for it to catch up, especially in the most expensive cities that have always struggled with high rent, prices remain high.

The top rent-burdened cities, according to Moody’s Analytics, are New York, Miami, Fort Lauderdale, Los Angeles, Palm Beach, Northern New Jersey, Boston, Ithaca, New York, and Flagstaff, Arizona.

In those cities, renters are paying more than 30 percent of their income in rent. In New York, according to Moody’s Analytics data referring to the first half of the year, renters were paying 64.9 percent of their salary in rent.

In Miami, renters were paying 42.5 percent of their wages in rent, in Fort Lauderdale 37.3 percent, and in Los Angeles 35.2 percent. The percentages in the other cities were Palm Beach 34.4, Northern New Jersey 33.5, Boston 33.0, Ithaca 32.0 and Flagstaff 30.4

For low-income families, Moody’s has calculated that the rent-to-income ratio is even higher, with poorer households spending an average 76.4 percent of their salary in rent in New York, for example.

“These cities have a long history of being rent-burdened, it didn’t just start in 2020 or 2021,” Lu Chen, a senior economist at Moody’s Analytics, told Newsweek. “Many of those metros have a bifurcated rental market where the average price of the rental market is often pulled up by some ultra-luxurious apartments which are really not tailored to the low- to medium-income families.”

The combination of a bifurcated rental market and different income distribution creates a situation in which many low- and medium-income families are severely rent-burdened.

“Unsurprisingly, New York is still the most rent-burdened city with the highest rent-to-income ratio at 64.9 percent,” Mary Le, a New York-based economist at Moody’s Analytics specializing in commercial real estate, told Newsweek.

“Compared to the last quarter, though, the number of metros that crossed that 30 percent threshold has decreased. Westchester [New York], Orlando [Florida] and Tampa [Florida] fell off that list. But it’s important to note that they are not very far from that threshold, and at some point may cross it again.”

Despite rent remaining extremely high in the nine cities above, some have experienced some relief in the past six months, with wages growing 2.3 percent year-to-date in New York, according to Moody’s, while rent growth slowed to 0.1 percent. In Los Angeles, rent growth slowed to 0.7 percent while income grew 1.8 percent.