Rental Market Trends in the U.S. — Inflation Data Continues to Show Rent Growth Slowing Down

Asking rents increased 3.4% in May 2024 compared to the same time last year, according to Zillow’s rental report for May.

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Updated July 11 with the latest consumer price index data from the Bureau of Labor Statistics.

Inflation data for May continued to show a slowdown in rent growth, according to the latest consumer price index data.

Rent is a major contributor to overall inflation and the cost of rent is also impacted by inflation, with costs rising for everything from building materials to maintenance and insurance.

The price index for shelter, which includes rent, makes up the biggest portion (34%) of the consumer price index, a proxy for inflation

U.S. Bureau of Labor Statistics. Measuring Price Change in the CPI: Rent and Rental Equivalence. Accessed Feb 13, 2023.
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The latest data from the Bureau of Labor Statistics released on July 11 shows that in June, shelter continued a more than 40-month increase, but growth is continuing to slow. For June, shelter, which includes rent, was the largest contributing factor for the overall inflation. It is also the largest contributing factor for the core inflation increase, which excludes food and energy.

But for rent, specifically, the seasonally adjusted month-over-month increase from May to June was rounded up to 0.3%. That rate shows that rent is growing slower compared with the previous month-to-month increases this year:

  • May to April: 0.4%

  • April to May 2024: 0.4%

  • March to April 2024: 0.4%

  • February to March 2024: 0.4%

  • January to February 2024: 0.5%

  • December 2023 to January 2024: 0.4%

Over the 12-month period ending in June, rent alone was up 5.1%, the same as the overall 12-month increase for shelter (5.1%).

The rent increase in the CPI looks different than data reported by rental websites like Zillow (see below). That’s because there’s a lag in how rent data is reflected in the CPI, which means it takes longer for rental shifts in the market to show up in the report. 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.

The rent-specific portion of CPI has been outpacing overall inflation for decades and most sharply began to diverge in the mid-to-late 2010s.

Rental website data has shown rent growth slowing for some time

Annual rental price growth remains slightly below pre-pandemic averages, according to the latest rental data from Zillow, the real estate website, for May 2024.

Rent prices are now 32.1% higher than they were before the pandemic, but rental growth seems to have slowed from the major spikes of 2022. In May, rents are 3.4% higher than at the same time last year. The average annual growth was 4% in May 2018  and 4.2% in May 2019.

Here are some of the other notable rental market trends for May, according to Zillow:

  • Rents average $2,036 across the U.S., a 0.6% increase from the previous month.

  • Median households spent 29.7% of their income on rent in May down from a height of 30.3% in June 2023. Renters need to earn $81,446 in order to afford the typical rent. 

  • Rent prices are up from a year ago in 48 of the 50 biggest metro areas in the country. The highest is in Providence, R.I., with an annual increase of 7.1% followed by Hartford, Conn. (7%). 

  • Multifamily vs. single-family rents: Multifamily rental prices grew 2.6% over the past year compared to a 4.7% rise in single-family rentals. But from April to May, the greater increase was among multifamily rentals (0.6%) compared to single-family rentals (0.5%).

  • Rent concessions fell: From April to May there was a dip in the share of rental listings on Zillow that are offering rent concessions — discounts for renters. That means property owners may be feeling more positive about the ability to find renters.

  • Rent concessions still increased in 46 of the 50 largest metro areas. The places with the biggest year-over-year gain in concessions as part of the entire rental market are Jacksonville, Fla.; Atlanta; Columbus, Ohio; Charlotte, N.C.; and San Diego, Calif.  

  • Wages are rising slower than rents. A recent analysis by Zillow that was released on May 7 shows that since 2019, rent prices have risen at a rate 1.5 times that of wages. More on that report here.

Top rental increases and decreases in the U.S.

Among 50 metros, the following had the highest annual rent increases among all types of housing:

  • Providence, R.I.: +7.1%

  • Hartford, Conn.: +7% 

  • Louisville, Ky.: +6.4%

  • Cleveland, Ohio: +6.3%

  • Buffalo, N.Y.: +6%

Only two metros in the U.S. saw rent declines: Birmingham, Ala. (-0.3%) and Tampa, Fla. (-0.4%).

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It’s more expensive to rent than ever before

More than 35% of households in the U.S. rent homes, according to 2017-2021 data from the U.S. Census Bureau

U.S. Census Bureau. QuickFacts, United States. Accessed Feb 13, 2023.
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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 recent report on America’s Rental Housing by the Joint Center for Housing Studies of Harvard University released on Jan. 25.

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

NYU Furman Center. State of Renters and Their Homes. Accessed Feb 13, 2023.
. The Harvard study found that in 2022, half of all renters spent 30% or more of their income on rent and utilities.

How did rent get so expensive?

The fast growth of rent costs since 2020 derives from a variety of factors, including: 

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. 

Expired rent freezes and discounts. Landlords are making 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, according to a November 2022 report from the real estate website StreetEasy. 

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. 

As mortgage rates rose in 2023, housing prices cooled faster than rents, which are finally rising at a slower pace than in the last three years.

In 2022, a promising development began: Multifamily construction in 2022 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.

On Jan. 25, 2023 the Biden administration proposed a “Blueprint for a Renters Bill of Rights,” a new set of federal actions aimed at promoting rental affordability that also include guidelines to strengthen tenant protections

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Who is most likely to rent?

Single people are more likely to rent than couples, regardless of whether they have children, according to a 2022 rental housing report from Harvard University

Joint Center for Housing Studies of Harvard University. America's Rental Housing 2022. Accessed Feb 13, 2023.
. Hispanic, Black and Asian residents are more likely to rent than own homes when compared with white residents. Those with incomes at or below $74,999 are more likely to rent than own compared with those with incomes $75,000 and over. 

Despite soaring rents, it’s still less expensive to rent than to buy. The typical rent for an average three-bedroom place is still more affordable than owning a similar-sized home in 95% of the 222 U.S. counties analyzed by ATTOM, a land and property real estate data curator, in its 2023 Rental Affordability Report.

The generation of adults most likely to rent is Gen Z with 74% of the cohort renting their homes, according to a March 29 data analysis by RentCafe, an apartment listing service. That's a pretty recent development since Millennial home buyers only began to outweigh renters in the cohort as of 2022, the data shows. The analysis found 51.5% of millennials now own their own home. The amount of millennial homeowners increased 28% from 2019 to 2022. But baby boomers are still the dominant generation owning their own homes, representing 40% of all homeowners in the U.S.

Rent vs. income

Generally, households should be spending no more than 30% of their gross income on rent, according to the NYU Furman Center

NYU Furman Center. State of Renters and Their Homes. Accessed Feb 13, 2023.

That means if a household earns the U.S. median income — $70,784 annually, or $5,899 per month, according to the U.S. Census Bureau — when applying the 30% rule, the goal would be to spend no more than $1,770 per month on rent

U.S. Census Bureau. Income in the United States: 2021. Accessed Feb 13, 2023.
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Those with the highest rent burden are disproportionately seniors, low-income, immigrants and racial or ethnic minorities, according to a 2015 Zillow analysis of U.S. Census Bureau data. Severely-burdened renters are also more likely to have long commutes via public transit and lack cars. Children are also often present in homes with high rent burdens. 

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