Rents Are Growing At Almost Double The Rate Of American Workers' Salaries

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During the 1970s, many of America's largest cities were also the scene of "rent strikes." Their rallying cry was often, "The rent is too high." It looks like the apocalyptic trend has returned in the 2020s. A Zillow study reveals that American rents are climbing at almost double the rate of American workers' salaries.

The study looked at rents from 2019 to 2023 and found that rents increased by nearly 30% during that period, while American worker salaries have only increased by 20%. That means rent went up 1.5x faster than American salaries in just four years. American workers, already being squeezed by inflationary pressures on consumer goods, are collectively crying uncle and demanding relief.

Zillow's findings will certainly qualify as unwelcome news if you're trying to rent an apartment in any of America's major metropolitan areas. Unfortunately, it will hardly come as a surprise. According to Zillow, rent costs are growing faster than worker wages in all but six of America's major metropolitan areas. The fact that home prices and interest rates are so high is only serving to keep many renters trapped in apartments they can hardly afford.

In years past, many American renters would rent apartments as steppingstones to homeownership. Today, an entire generation of Americans is coming to grips with the reality that today's rents make saving enough money to buy a house, or saving any money at all, like running on a treadmill to nowhere. Now, the high rents in cities like New York and San Francisco are spreading like wildfire.

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Even the Sunbelt and the Midwest are now experiencing the kind of dramatic spikes in rental prices that used to be commonplace only in major metropolitan areas on America's coasts. The study showed that Tampa, Florida, has seen rents grow by 50% since 2019, while worker salaries in the city have only grown by 15%. Up the coast, Jacksonville rents are up 35% while worker salaries have only increased by 12.2%

This dramatic spike in rents is not only keeping renters in their apartments for longer but also contributing to the homelessness crisis that has rocked many of America's major metropolitan areas. It is not at all uncommon now to see large homeless encampments or makeshift tent cities popping up in big cities all over the country. However, their presence in Southern and Midwestern metropolitan areas is a new and unwelcome surprise.

Ironically, San Francisco and San Jose have seen some of the smallest rent growth during the study, with gains of 3.4% and 6% compared to average wage growth of around 12%. Unfortunately for residents in both these cities, the average apartment rent per square foot shot into the stratosphere almost 15 years ago along with the median home price in those cities.

More troublingly, the pace of rent increases, home prices and interest rates is creating a housing crisis so acute that few of America's politicians or economic observers can offer anything more than vague statements of encouragement about the future. The recent comments by Treasury Secretary Janet Yellen are a perfect example of this attempt to provide limited hope for the future, while at the same time making no concrete commitments to solving the problem.

In speaking to Bloomberg News, Yellen said "Housing is a real problem in the United States due to a huge shortage of affordable" dwellings. That said, I strongly believe — I think it is highly likely — that shelter costs, which have been pushing up inflation, will come down." Those are encouraging words, but for most American renters, the relief she's predicting will likely arrive several days late and several dollars short.

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