Renters Surge to Record Numbers as Housing Affordability Crisis Deepens in Major U.S. Cities

Photo byThe World Property Journal

In a striking reflection of America's evolving housing landscape, new data reveals that the renter population is expanding at an unprecedented rate, far outpacing the growth of homeowner households. According to the latest analysis by Redfin, the number of renter households surged to a historic 45.2 million in the second quarter of this year—a 1.9% increase from the previous year. This growth rate is over three times faster than the 0.6% increase observed in homeowner households, which now stand at a record 86.3 million.

The Renter Boom

The growth in renter households has reached the second-fastest pace since 2021, and it reflects a broader trend of increasing demand for rental properties amid soaring homeownership costs. The rapid expansion in the renter demographic highlights a stark shift in the housing market. The first quarter of 2024 saw a peak in renter household growth at 2.8%, the highest since 2015, underscoring the rising pressure on renters.

Jonathan Kinsey, EMEA Lead and Global Chair of Data Centre Solutions at JLL, notes, "The cost of renting and buying a home has skyrocketed, but the affordability crunch is less severe in the rental market due to increased apartment construction."

Housing Affordability Crisis

The affordability crisis is manifesting vividly across major U.S. cities. While the median rent has climbed to $1,654—just shy of its all-time high—homeownership costs have skyrocketed. Mortgage payments have surged approximately 90% above pre-pandemic levels, driven by record-high home prices and elevated mortgage rates. In contrast, asking rents have increased by only 23% from pre-pandemic levels.

The disparity in cost growth between renting and buying is attributed to a surge in multifamily construction. The U.S. is adding new multifamily units at an annual rate of 563,000, a pace only second to the peak set earlier this year. This building boom, spurred by projects initiated during the pandemic, has helped alleviate some of the rent pressure. However, the slowdown in new multifamily building permits and starts signals potential rent hikes in the near future.

City Spotlight: High Rentership Rates

The trend of rising renter households is particularly pronounced in high-cost coastal metros:

• Los Angeles leads the nation with a staggering 53% rentership rate.
• San Diego follows closely at 52.4%.
• New York City is not far behind, with 50.1% of households renting.

In contrast, cities like Fresno, CA, with a rentership rate of 49%, and Austin, TX, at 46.3%, show that affordability challenges can also influence rental trends in less expensive areas. Fresno’s high rentership rate is partly due to a significant portion of the population living below the poverty line, which complicates homeownership.

On the other hand, areas where home buying remains more affordable, such as Worcester, MA, report lower rentership rates. Worcester’s 23.2% rentership rate is the lowest among the metros analyzed, reflecting a more balanced housing market in terms of homeownership and renting.

Looking Ahead

The current dynamics underscore a critical need for balanced housing policies that address both rental and homeownership challenges. While the multifamily construction surge has provided temporary relief, the persistent affordability issues indicate a pressing need for innovative solutions to ensure housing remains accessible and equitable for all Americans.