Rent Prices Keep Rising Amid Inflation, Low Inventory

Updated Oct. 17 with data from the latest consumer price index report and Zillow rental market report.

Over the past few years, it’s become more expensive than ever to rent — especially since the beginning of the pandemic. In fact, rents were unaffordable in 2022 for 22.4 million households that paid rent — an all-time high — according to a report on America’s Rental Housing by the Joint Center for Housing Studies of Harvard University released in January.

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Spending 30% of your income on rent means a household is “moderately rent burdened,” but spending 50% or more means a household is “severely rent burdened” by federal standards [5]. The Harvard study found that in 2022, half of all renters spent 30% or more of their income on rent and utilities.

Average rent in the U.S.

Typical asking rent costs $2,050 across the U.S., according to the September 2024 rental market report from Zillow, a real estate website.

Rents are highest in New York, where the median was $3,500, according to Zillow data as of Oct. 8. That’s followed by San Francisco ($3,450), Boston ($3,200), Miami ($3,191) and San Jose, Calif. ($3,150).

Rents are lowest in Birmingham, Ala., where the median was $1,125 as of Oct. 8. That’s followed by Milwaukee ($1,199), Cleveland ($1,200), St. Louis ($1,215) and Detroit ($1,225).

Are rent prices going down?

Rent prices continue to rise. In September, rents were 3.3% higher than at the same time last year, according to Zillow.

The pace seems to have slowed from the major spikes of 2022, though. Zillow data shows rental price growth is slightly below pre-pandemic averages. Still, rent prices are 33.7% higher than they were before the pandemic.

Whether rent is rising (and by how much) depends on where you live and the type of housing you live in, according to Zillow:

• Rent prices are up from a year ago in 49 of the 50 biggest metro areas in the country. The highest is in Hartford, Conn., with an annual increase of 7.5% followed by Cleveland (7.2%), Louisville (6.4%), Richmond, Va. (6.1%) and Cincinnati (6%). 

• Multifamily rental prices grew 2.5% over the past year compared to a 4.3% rise in single-family rentals.

• Rent concessions — discounts for renters — are up from year-ago levels in 44 of the 50 largest metro areas. The increase is highest in Raleigh, followed by San Antonio, Louisville, Austin and Denver.

The latest consumer price index report from the Bureau of Labor Statistics released on Oct. 10 tells a similar story: In September, the shelter index, which includes rent, continued to outpace annual inflation. But housing price growth is slowing down.

Over the 12-month period ending in September, according to the BLS, rent alone was up 4.8%, a hair lower than the overall 12-month increase for shelter (4.9%).

It’s worth noting that rent increases in the CPI look different from data reported by rental websites like Zillow because there’s a lag in how rent data is reflected in the CPI. That means it takes longer for rental shifts in the market to show up in the report. Zillow calculates changes in asking rents using its Zillow Observed Rent Index, which is based on its rental database. Properties are weighted so that the index reflects the rental market as a whole.

The lag is primarily due to the cycle of renewals for leases. Since most leases last around a year, a renter’s costs will stay the same all year long. It’s only when the lease ends that a better understanding of the rental market emerges.

Why is rent so high?

Rent prices have spiked since 2020 because of a combination of factors, including inflation, low inventory, barriers to homeownership and shifts in tenant demand. Here’s how those factors have played out:

Inflation. Higher costs across the board mean landlords pass on higher costs (such as rising wages for maintenance workers or repair costs) to renters. Higher rent costs contribute to inflation and the cycle repeats.

Lack of inventory. There is a shortage of vacant rental properties in general, and of affordable ones in particular.

Barriers to homeownership. Prospective homeowners remain renters for longer as they face high demand and low inventory of existing homes, rising mortgage interest rates, as well as supply chain disruptions that have made it more expensive and difficult to construct new homes.

Expired rent freezes and discounts. Landlords made up for pandemic-era rent freezes and steep discounts in urban areas by hiking prices on new units and lease renewals.

A shifting workforce. As the pandemic increased the popularity of remote work, deep-pocketed renters sought larger homes in areas that had been previously relatively low-cost. This migration increased rents in suburban areas more than it lowered them in urban ones, yielding a net increase in rents.

More demand to live alone. Prospective renters are increasingly looking for studio and one-bedroom apartments, driving up demand for available housing.

Another thing to consider is that wages are rising slower than rents, which can make rent feel even more expensive. Since 2019, rent prices have risen at a rate 1.5 times that of wages, according to a May 7 analysis by Zillow.

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When will rent prices go down?

It’s not clear when rent prices will fall but one promising development indicates it could be on the horizon.

In 2022, multifamily construction reached a 50-year high nationwide, according to the rental listing service RentCafe. A new supply of housing is likely to bring down overall rent growth. And since many cities require inclusionary housing — meaning a portion of new housing must be affordable — new construction also means new affordable housing.