Most renters can't afford a median-priced apartment: Redfin

Despite rent growth flattening out, less than half of America's tenants earn enough money to afford a median-priced apartment, Redfin reported Monday. 

Rents fell during the pandemic due to a rise in multifamily construction, the online brokerage asserted. But with today's low inventory of homes for sale, leading many to choose to stay out of the real estate market, rent prices reflect steady demand. 

The typical U.S. renter household earns about $54,712 per year, an estimated income that's 17.3% below what is needed to afford a typical apartment. Only 39% of renters make the estimated $66,120 salary needed to pay the bills. Prices are being capped, however, by a backlog of new units hitting the market monthly, Redfin said. 

Redfin's estimate of the salary needed to be part of that 39% is the highest it's been since October 2022. That's a 22.9% increase from the pre-pandemic requirement in May 2019, matching the increase in asking rents. 

Last month, the median apartment's asking rent was $1,653, just $47 short of the record high. Redfin noted that rent growth has flattened, as the required income to afford a typical apartment only increased 0.8% from the same time last year. 

"Rents are growing at a snail's pace compared to the rapid increases we saw during the pandemic, and are unlikely to soar again anytime soon. As a result, wage growth should continue to outpace rent growth in the coming months, as it has been doing since 2022," said Redfin Senior Economist Sheharyar Bokhari. "That will help narrow the affordability gap for renters, but for a lot of folks, the math still won't check out. Many U.S. renters are and will remain burdened by the cost of having a roof over their head, and unlike homeowners, they're not building wealth through rising property values."

In major East Coast cities like New York and Miami, the typical renter earns an estimated 40% less than they need to afford the median-priced apartment, Redfin said. 

The typical renter earns enough to afford the median-priced apartment in only five of the major cities in the U.S. – Austin, TX, Houston, TX, Phoenix, AZ, Washington, D.C., and Dallas, TX. The estimated median renter household income is 16.8% more than the requirement in Austin, TX.

Many Sun Belt states saw more apartments being built to meet demand from new residents during the pandemic. Those new apartments are now facing vacancies as the pandemic housing boom has ended, causing rent prices to cool, Redfin said.