The increasing costs of renting

by on April 17, 2014 at 3:52 am in Data Source, Economics, Uncategorized | Permalink

For rent and utilities to be considered affordable, they are supposed to take up no more than 30 percent of a household’s income. But that goal is increasingly unattainable for middle-income families as a tightening market pushes up rents ever faster, outrunning modest rises in pay.

The strain is not limited to the usual high-cost cities like New York and San Francisco. An analysis for The New York Times by Zillow, the real estate website, found 90 cities where the median rent — not including utilities — was more than 30 percent of the median gross income.

In Chicago, rent as a percentage of income has risen to 31 percent, from a historical average of 21 percent. In New Orleans, it has more than doubled, to 35 percent from 14 percent. Zillow calculated the historical average using data from 1985 to 2000.

Nationally, half of all renters are now spending more than 30 percent of their income on housing, according to a comprehensive Harvard study, up from 38 percent of renters in 2000.

That is from Shaila Dewan.  And Ryan Avent adds comment.

1 Steve Sailer April 17, 2014 at 4:38 am

The exurbs used to provide an alternative to renting in built-up areas for those willing to put up with long commutes. But mostly high gas prices since early 2007 have choked off that alternative.

My impression, though, just from street level in the dense L.A. suburb of Valley Village, CA is that a lot of the apartment projects that were started in 2007 by tearing down homes and businesses are just now finally getting finished after empty lots lay fallow from 2008-2011 or so. So there may be more supply of apartments on the way.

Traditionally, however, Americans, like panda bears, don’t breed well in confining spaces, so family formation will likely continue to lag.

2 ThomasH April 17, 2014 at 7:39 am

Congestion pricing of city streets and self driving vehicles would reduce the externalities of density and make density more pleasant for residents and with investment in transit cheaper to bring people together to work in (larger) city cores. Progressive property taxes might help spread the benefit of housing and commercial “development” more widely and mitigate against some of the political resistance to the same.

3 DMS April 17, 2014 at 1:54 pm

Agree that driverless car may have huge impacts but it might also allow further suburban expansion due to lower friction of distance.

4 Rahul April 17, 2014 at 4:49 am

A lot of owner managed rental housing suddenly transitioned to professional management companies starting circa 2006. This was one change correlated with rents going up. Don’t know how robust this trend was; ours was a midwestern town, not too large.

Also there was some sort of supply side push for building fancier rental apartments, with gleaming facades & amenities no one really cared for much. Don’t think the demand was strong for such gold plated rental offerings but sometimes there were no other options.

5 Steve Sailer April 17, 2014 at 5:43 am

If somebody is building an apartment building near my house, I have a rational incentive to demand the government require it be as gold-plated as possible: I don’t want to live around a lot of low-rent folks.

Much of modern American local politics is a giant game of hot potato intended to dump poor people on less-privileged municipalities. The leading liberal cities, such as NYC and DC, are rectifying the mistakes their liberal grandfathers made letting in so many poor people in 1940-1990.

In most places, this war is fought with environmental restrictions and zoning codes. But in New York City, where the usual rules against overt racism don’t apply, Mayor Bloomberg spent 12 years having his cops hassle blacks and Latinos on the street, partly to encourage them to move to Florida.

The big winners so far have been NYC, DC and SF. The nation’s capital has gone from 31% white in 2000 to 43% white in 2012, a spectacular increase.

San Francisco is down from 13.4% black in 1970 to 6.1% black in 2010, while Hispanics are only up from 11.6% to 15.1% over 40 years.

Mayor Emanuel is trying hard to encourage blacks to leave Chicago, but it’s not clear whether he’ll be able to pull this off — Chicago isn’t the home to the national media the way New York and DC are, so Chicago can’t be as blatant.

6 andrew' April 17, 2014 at 6:37 am

Steve, I was only joking when I suggested liberals should require liability insurance for blacks instead of guns.

You are suggesting Blomberg took me seriously.

7 Steve Sailer April 17, 2014 at 8:14 pm

Mayors like Bloomberg and Emanuel take race very, very seriously.

8 Jan April 17, 2014 at 7:00 am

Ha, you live in CA. When it comes to racey/immigrantiony things you’re screwed.

9 Z April 17, 2014 at 8:33 am

I’m fond of saying that “gentrification” is a polite word for rich white liberals to chasing off the minorities so their kids can have a safe place in the city. The usual suspects bellow in protest when I say this, but the results speak for themselves.

10 Bryan April 17, 2014 at 8:40 am

The first cases of gentrification seemed to be by accident. It’s still a surprise when it actually happens on a big scale. Public policy can’t make a place “cool”.

11 Z April 17, 2014 at 9:42 am

Liberal white New Yorkers are convinced stop and frisk made NYC cool again. The people of Pittsburgh point to public policy for why their city did not become Detroit. In fact, the “cool” factor seems very well planned as it follows a narrow set of rules everywhere it happens. Believing it “just happens” is a nice foundation myth, but it is not reality.

12 dead serious April 17, 2014 at 11:54 am

Liberal white New Yorkers are convinced stop and frisk made NYC cool again.”

Only in that piece of swiss cheese you call your brain, you maggot.

13 Steve Sailer April 17, 2014 at 7:21 pm

The city of Pittsburgh contends with Portland and Seattle on various measures of whitest city in the country. That’s a big explanation for why Pittsburgh is getting trendy again, like Portland in the 2000s and Seattle in the 1980s. Pittsburgh may have dodged the Mexican bullet.

14 David Sucher April 17, 2014 at 1:59 pm

Yup…”environmental restrictions and zoning codes”…bad news for Rand Paul if he ever gets serious about libertarian land use policies i.e. NO ONE who owns wants to get rid of zoning.wants

15 David Sucher April 17, 2014 at 2:07 pm

Ok, maybe not “NO ONE” but very few who are USERS (rather than developers) want to get rid of zoning. In fact developers like zoning too because it creates stability and predictability which reassures THEIR customers. Of course they bitch and moan at the margings — “I want another 5 stories!” — but in most caes they have already done their proformas based on NOT having those “I gotta have” five stories.

16 Niko April 18, 2014 at 4:54 pm

Regulation is also taking it’s toll on building costs and forcing developers to do gold-plated places just to recoup costs. However, it does often allow older stock to become lower rent, easing the pressure indirectly.

17 ummm April 17, 2014 at 4:49 am

Just another reason why home ownership is better than renting

18 Rahul April 17, 2014 at 6:57 am

Doesn’t Zillow have an incentive in showing Renting = Bad? Not saying this nullifies the story but take it with a pinch of salt.

19 Jody April 17, 2014 at 8:37 am

I own a handful of rental properties. My experience with Zillow is that Zillow consistently overestimates what the rental market will bear for a property. But that’s in small town USA, so your mileage may vary…

20 Steve Sailer April 17, 2014 at 5:23 am

Ryan Avent’s piece in the Economist about how San Francisco should build Blade Runner-sized apartment buildings is the usual thing you get when intellectuals are not allowed to talk honestly about race.

In reality, super-liberal San Francisco is only 22% Non-Asian Minority, and it likes it that way. San Franciscans look to the south at Los Angeles, which is 60% NAM, and say (to themselves), “Thank God we had the Sierra Club to come up with excuses for us pushing the blacks and not letting the Mexicans in.”

It’s not totally a coincidence that the first Earth Day was in 1969, the year after the Fair Housing Act of 1968. Environmentalism has provided a wealth of rationalizations for keeping land costs high and the poor far away. Northern California was both epicenter and chief beneficiary of the environmental movement. It’s not coincidental, either, that the home of the environmental movement is now enormously rich.

21 Jon April 17, 2014 at 8:01 am

Do you have data to support your assertion? Data that shows correlation between race, income, and views on environmental policy. Just citing that environmental advocates tend to be more educated and wealthy does not cut it; as wealth and education is correlated with being outspoken on any sides of policy debates. i.e. there aren’t too many poor people uneducated people writing libertarian economic blogs either.

Generally the data I have seen has indicated that support for liberal views decreases as income and education increase, but eventually start to increase with income and education when these reach a rather high level. This is probably a reflection of self interest.

22 Steve Sailer April 17, 2014 at 7:19 pm

The Red State – Blue State paradox is that rich people in Red States vote Republican while rich people in Blue States vote mixed. The underlying factor is the Red States typically have their metropolises inland, so their suburbs can expand 360 degrees, which lowers land prices, ceteris paribus, which encourages affordable family formation, which encourages voters with families to vote for the family values party.

Blue State metropolises typically have deep water constraining suburban expansion — e.g., San Francisco — which keeps land prices high. That discourages white people from having families, except for the ones rich enough not to need the government to provide an encouraging moral atmosphere. So, blue staters typically vote on things like environmental issues to keep blacks and Mexicans out, or now, they ostentatiously vote for gays, who are a decorative non-crime-committing minority who raise property values — gays are the shock troops of gentrification.

23 Jon April 17, 2014 at 10:36 pm

But do you have data beyond speculation? San Diego trends Republican as is Orange County, CA. Washington DC which is far enough inland to have the 360 degrees to grow is about as Democratic as you can get. . Although it is a port city, Balitmore has quite a bit of expansion room.

Blue and Purple states have plenty of minorities. Just look at Washington, DC, Baltimore, New York, etc. Those minorities vote heavily democratic.

24 Steve Sailer April 17, 2014 at 10:59 pm

Sure, I have compiled a ton of data over the last four presidential elections. Here’s a 2005 piece:

25 Steve Sailer April 17, 2014 at 11:00 pm

Affordable family formation accounts for huge fraction of Red State – Blue State variation:

From 2005

26 Steve Sailer April 17, 2014 at 11:02 pm
27 Steve Sailer April 17, 2014 at 11:03 pm
28 Steve Sailer April 17, 2014 at 11:04 pm
29 David Sucher April 17, 2014 at 2:03 pm

What do you mean by “It’s not totally a coincidence that the first Earth Day was in 1969, the year after the Fair Housing Act of 1968.”

What is the connection?

30 Steve Sailer April 17, 2014 at 7:12 pm

Various civil rights era housing measures, including easy credit, set off massive white flight from less privileged areas, such the West Side of Chicago. More privileged areas, such as Oak Park, (home of dozens of Frank Lloyd Wright buildings), which is adjacent to the West Side, used the panoply of new liberal and historical preservation laws that emerged at the end of the 1960s to maintain a white majority in beautiful Oak Park. (The most effective was the legendary black-a-block quota imposed on real estate agents.) Today, Oak Park is majority white, heavily gay, affluent, and votes for Obama 4 to 1.

31 David Sucher April 17, 2014 at 10:40 pm


You have not made the connection between Earth Day and Fair Housing.

I’ll make it easy for you: you can’t.

Oh anyone can make a connection in the broadest sense that Americans are do-gooders and want to improve their country and that liberals are notorious do-gooders (though there were Republican do-gooders too when it came to desegregation and environmental issues) and that many people believed in both fair housing and environment. But they were discussed in the same breath ONLY in passing. They had different politics and different activist cores.

I suggest you might want to look into the history of Earth Day starting with basic facts such as “When was the first Earth Day?” (You state1969 and you are wrong. It was 1970.)

32 Kevin Erdmann April 17, 2014 at 6:10 am

Sounds like we should let the prices of houses rise to the market clearing price so we can get some new building, instead of treating it like a bubble that has to be popped.

33 andrew' April 17, 2014 at 6:43 am

I see a need for cheaper housing.

Unfortunately housing projects don’t seem to be the lowest total cost technology.

Let’s start a poverty chic trend. It is interesting how many rich white people are on YouTube with van life or mini and micro houses that, perhaps not inconsequentially, can be moved at the drop of a hat.

34 Jon April 17, 2014 at 7:41 am

Why do you think they are significantly below the market clearing price. In fact only a few years ago it was clear that the market clearing price was falling.

35 Andrew' April 17, 2014 at 10:57 am

For one thing, which market clearing price?

The one where government isn’t involved, or the one we have now that is focused on bailing out lenders?

36 anon April 17, 2014 at 11:42 am


37 Cliff April 17, 2014 at 10:36 am

Yeah, if we just keep increasing prices I am sure they will start building some more properties in central London. Oh wait, they have, shacks in peoples’ back yards with an extension cord if they are lucky. Can’t wait for that to happen in San Fran. God forbid building restrictions be eased, just let the prices go up and up and that will solve all our problems!

38 Rahul April 17, 2014 at 7:02 am

How much of this trend is rent going up versus income falling down? Especially in places like New Orleans.

39 Urso April 17, 2014 at 11:17 am

If I’m correctly guessing what you’re trying to imply, it’s completely wrong. In New Orleans income is going up, but rents have absolutely skyrocketed.

40 dead serious April 17, 2014 at 7:19 am

If Zillow is involved, expect lots of WAGs compounded by massively flawed algorithms.

41 Jim B April 17, 2014 at 8:17 am

What is driving the New Orleans data point? Based on the graph for New Orleans at Zillow, there is a dip in the rent affordability in early 2006 (just post-Katrina), but most of the change came in 2011 when the affordability went from ~19% to ~32%. Is that because new construction projects from Katrina were finally completed with new rents higher than the old? How much of that was due to increased flood insurance premiums and building codes?

The NYT article also has Ocean City, NJ in its sidebar as one of the “20 cities where rents are highest relative to median gross income”. Really, never would have guessed a Jersey shore town has high rents compared to the incomes of those who live there (and work on the boardwalk). College towns seem to dominate that list as well (College Station, TX, Ithaca, NY, Boulder, CO, Hattiesburg, MS, San Luis Obispo, CA). College kids median income is probably near zero, so the rent their out-of-town parents pay for off-campus housing is probably quite high compared to the students’ stated income.

42 anon April 17, 2014 at 11:43 am

Not sure about the other places, but Boulder, CO has had restrictions on growth for a long time.

43 Ed April 17, 2014 at 9:25 am

Though I think the data is suspect, I also think this trend may be explained more by falling incomes than by rising rents.

Why don’t more economists promote people living in RVs? They can be manufactured more quickly and take up less space than houses and apartments, and they promote labor mobility since you can move to the next bubble economy without having to sign your house/ get out of your lease, then find a new place.

44 Andrew' April 17, 2014 at 11:00 am

RVs are expensive, but trailers are cheap. Since you don’t need to move that often you can rent a truck as needed.

I dream of a future where tent cities of trailers are set up inside vacant malls. Occupy Mall Street. I don’t ask for much.

45 dead serious April 17, 2014 at 11:52 am

How about your own personal shipping (living) container, transported to your choice of location for a low, low cost?

Bonus: they’re stackable. Ladder not included.

46 Thomas April 17, 2014 at 7:28 pm

Modern Pueblos, I like it.

47 BenK April 17, 2014 at 10:19 am

Very suspect result. One bit of evidence … College Station TX is one of the high rent areas.

Much of Texas is relatively low cost for housing. This is not a town one would expect to be overwhelmed by housing costs. (Caveat: property taxes somewhat substitute for income taxes, so rents would be expected to compensate for a cost of ownership).

But it is… a college town, we would expect many of the renters to be students. Annual income? Deceptively low, because they really aren’t ‘households’ in an economic sense.

So, while the data might be technically correct, it is likely going to occur in many college towns, because the true rent payers are not the technical households.

The basic strategy of comparing median rent to median income is actually quite a poor one, anyway…

48 Michael April 17, 2014 at 10:41 am

I think you’re on to something here, the metric here is seriously flawed. Since when is it unusual for poor people to have roommates? Or single people? One would expect college towns in particular to have high levels of rent to income ratio.

49 Andrew' April 17, 2014 at 11:01 am

THIS is why you don’t change how you measure a metric in the middle of a huge process change.

Or, just call this the daily anti-ACA crowd public service message.

50 Phil April 17, 2014 at 1:30 pm

A lot of people in this area are working with both the cost of housing and the cost of transportation combined. A lot of young people are willing to pay more than 30% in rent if they don’t have to own a car. As long as you have enough mobility, you can save a significant amount of money this way.

51 Brandon Berg April 17, 2014 at 1:54 pm

How much of this is just people demanding larger housing units?

52 Albigensian April 17, 2014 at 2:33 pm

A higher cost of renting may be a hangover of the housing bubble, as many who could afford to buy remain reluctant to do so.

The result is an increase in renters, in a market where supply of rental units has not caught up with the (probably temporary) surge in demand.

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