1 in 4 Americans spend half their income on rent, government data shows

Americans are spending an increasingly larger share of their monthly income on rent, offering the latest glimpse into the scale of America's housing affordability crisis.

According to the Census Bureau, 25.6% of U.S. renters spend more than half of their income on housing. Nearly half of renters allocate more than 30% of their income toward housing costs.

“Housing costs rose between 2022 and 2023 for both homeowners and renters,” said Molly Ross, a survey statistician with the Census Bureau.

Ross said that after adjusting for inflation, the median monthly rent payment rose to $1,406 in 2023 from $1,354 the previous year.

This is equivalent to a 3.8% increase in rent, which is more than double the rise in home values over the same period. Ironically, this increase accounts for 95% of the growth in inflation-adjusted household income for 2023.

So, while inflation-adjusted incomes rose in 2023, most of those gains went toward higher rent payments.

According to the Census data, roughly 21 million households meet the Department of Housing and Urban Development’s criteria of being “cost-burdened.” A cost-burdened household spends at least 30% of its monthly income on shelter.

Economists say the housing affordability crisis is expected to get worse before it gets better, with those on the lower rungs of the income ladder suffering the most.

A national shortage

Although much has been written about America’s housing shortage, economists say the biggest problem is a lack of affordable housing.

According to the National Low Income Housing Coalition, the U.S. needs to build 7.3 million affordable rental units for low-income renters to alleviate their cost burden.

The group estimates that there are only 34 affordable homes for every 100 extremely low-income renters.

The Biden administration has made rent affordability a key issue, but not everyone is convinced that the White House is pursuing the right strategies to fix the problem.

In July, President Biden called on Congress to pass legislation limiting rent increases on existing units to 5%.

Critics complained that such a policy amounts to rent control, which would stifle the development of affordable properties and exacerbate the housing shortage.

The National Association of Home Builders, a leading trade group, has outlined a ten-point plan for improving housing affordability.

Many of the recommendations center around reducing bottlenecks related to zoning, permitting, and taxes, which would allow developers to expedite their projects.

Until the problem is fixed, more Americans will get priced out of rental markets, especially in major cities where rents are increasing the most.

According to a Creditnews Research study, households earning an average income can’t afford rent in 27 of the country’s largest 100 cities. The study compared rent-to-income ratios to determine affordability.

Despite these affordability challenges, renting is much cheaper than owning a home. The same study found that households earning an average income can only afford to buy a home in 53 of the nation’s largest 100 metro areas.

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