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Seattle Renters Need Biggest Income Boost to Keep Up with Rising Rents

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U.S. renters would need a raise of about $168 a year in 2017 just to keep up with expected rent increases over the next 12 months as rental affordability concerns persist

– Renters in Seattle, Los Angeles, and Boston need annual income increases of more than $1,000 to avoid dedicating more of their paychecks to rent.

– Rents are forecasted to be $1,420 at this time next year. Annual incomes will need to rise $168 for renters to keep pace with rising rents.

– In most major markets, rental affordability is worse than it was before the housing boom and bust.

SEATTLE, April 7, 2017 — Renters in Seattle, Los Angeles, and Boston need the biggest income increases in 2017 to keep up with rising rents, according to a new Zillow analysis(i). In each of these metros, renters need their annual incomes to be at least $1,000 higher next year to have the same amount of money left over after paying rent.

Nationally, annual incomes would need to rise just $168 for renters to keep up with rising rents in the next year alone – an increase that comes on top of nearly five years of rising rents putting a dent in paychecks across the country.

These income increases will only maintain the current amount of left over cash after paying rent. In several major metros, the share of income needed to pay rent already surpasses the general rule of not spending more than 30 percent of income on housing. In nearly all large markets, the median rent requires a larger share of income than it did before the housing bubble and bust.

Housing affordability is still a significant issue for renters, who have experienced rising rents for years. In some markets, the median rent requires more than 40 percent of the typical household income. However, rent appreciation is slowing, and rents are predicted to rise just 1 percent over the next year.

“For a long time now, renters have faced an affordability crisis when it comes to housing, and renters in some hot markets will still need significant raises just to keep up with rising rents,” said Zillow Chief Economist Dr. Svenja Gudell. “Incomes have a ways to go to bring rental affordability closer to historical levels, but recent gains are being met with slowing rent appreciation, a welcome sign for renters.”

Top Five Markets Needing the Biggest Annual Income Increase to Keep Up with Rising Rents

Metro

Annual Income Increase

1.

Seattle

$1,248

2.

Los Angeles

$1,152

3.

Boston

$1,140

4.

Sacramento, Calif.

$792

5.

Orlando, Fla.

$672

 

Not all rental markets are expected to see as strong of rent appreciation. Renters in the Bay Area, Chicago, and Houston, for example, do not need their incomes to grow to have the same amount of money left over after paying rent. Income growth in these markets will provide some much needed relief for renters in terms of housing affordability.

Metropolitan
Area

Zillow Rent
Index
(February
2017)

Forecasted
Zillow Rent
Index
(February
2018)

Annual Income
Increase Needed
to Maintain
Current
Disposable
Income After
Paying Rent

Annual Income
Percent Change
Needed to
Maintain Current
Disposable
Income After
Paying Rent

United States

$1,406

$1,420

$168

0.3%

New York/Northern New Jersey

$2,391

$2,382

$0

0.0%

Los Angeles-Long Beach-Anaheim, CA

$2,642

$2,738

$1,152

2.0%

Chicago, IL

$1,619

$1,603

$0

0.0%

Dallas-Fort Worth, TX

$1,565

$1,609

$528

0.9%

Philadelphia, PA

$1,568

$1,593

$300

0.5%

Houston, TX

$1,547

$1,540

$0

0.0%

Washington, DC

$2,114

$2,140

$312

0.5%

Miami-Fort Lauderdale, FL

$1,854

$1,879

$300

0.6%

Atlanta, GA

$1,335

$1,334

$0

0.0%

Boston, MA

$2,342

$2,437

$1,140

1.7%

San Francisco, CA

$3,354

$3,240

$0

0.0%

Detroit, MI

$1,175

$1,184

$108

0.2%

Riverside, CA

$1,754

$1,792

$456

1.1%

Phoenix, AZ

$1,309

$1,346

$444

0.9%

Seattle, WA

$2,100

$2,204

$1,248

1.8%

Minneapolis-St Paul, MN

$1,566

$1,606

$480

0.8%

San Diego, CA

$2,452

$2,506

$648

1.2%

St. Louis, MO

$1,132

$1,118

$0

0.0%

Tampa, FL

$1,347

$1,373

$312

0.7%

Baltimore, MD

$1,720

$1,705

$0

0.0%

Denver, CO

$1,998

$2,043

$540

0.9%

Pittsburgh, PA

$1,068

$1,049

$0

0.0%

Portland, OR

$1,804

$1,859

$660

1.2%

Charlotte, NC

$1,248

$1,280

$384

0.7%

Sacramento, CA

$1,709

$1,775

$792

1.5%

San Antonio, TX

$1,323

$1,330

$84

0.2%

Orlando, FL

$1,396

$1,452

$672

1.6%

Cincinnati, OH

$1,254

$1,299

$540

1.1%

Cleveland, OH

$1,141

$1,136

$0

0.0%

Kansas City, MO

$1,251

$1,280

$348

0.7%

Las Vegas, NV

$1,247

$1,258

$132

0.3%

Columbus, OH

$1,293

$1,315

$264

0.5%

Indianapolis, IN

$1,184

$1,161

$0

0.0%

San Jose, CA

$3,449

$3,421

$0

0.0%

Austin, TX

$1,694

$1,706

$144

0.3%


About Zillow

Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

(i) Zillow computed the dollar value associated with our 12-month-ahead rent forecasts (February 2017 to February 2018) across major housing markets and then compared these dollar values to average wage and salary income in each market as reported for 2016-Q3 in the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages. We then calculated the annual percent increase in incomes necessary to cover expected rent growth over the next 12 months. We assume that the entire paycheck increase will go to housing costs with no increases in other costs. It does not account for taxes or rising costs of other items such as food, healthcare or energy. For markets where we forecast an aggregate rent decline over the next 12 months, we force the necessary paycheck increase to zero.