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Although higher rent burdens dropped from 49 metros down to five in the first quarter of 2023, many metros still sit above 30% of income being spent on rent.

According to Moody’s Analytics' U.S. State of Rent Burden report, there was a 91% drop from Q4 2022 to Q1 2023 in the number of U.S. primary metros still experiencing higher rent burdens as rent-to-income ratios (RTI) finally cool after over three years of climbing rates.

“The fever is finally breaking. Since Q4 2019, 82% of metros had higher rent burdens compared to pre-COVID because rent disproportionately rose faster than incomes,” writes Lu Chen, senior economist, and Mary Le, economist, Moody’s Analytics. “Rising mortgage rates caused many households to be priced out from home buying and would-be buyers to remain renters. Apartment demand surged as a result and drove rates sky-high. The vast majority (91%) of all metros finally caught a break from growing rent burdens in Q1, as rent growth moderated or even declined given affordability pressures and slowing migration. However, we are not quite at an inflection point yet.”

Compared with past decades, the cost of shelter remains significantly higher relative to wages even with the near-term relief. New York City was the only metro rent-burdened in 1999, with a median household allocating 53.5% of their income to the average-priced apartment. According to Moody’s Analytics, the pandemic exacerbated the issue increasing NYC’s RTI by 8.4% between Q4 2019 and Q1 2023 to 66.9%.

Other metros followed suit with the U.S. becoming rent-burdened nationwide in Q4 2022—the first time in nearly 25 years of Moody’s Analytics' tracking history. In Q1 2023, six other U.S. metros in addition to NYC are considered rent-burdened: Miami at 42%; Fort Lauderdale, Florida, at 36.8%; Los Angeles at 34.7%; Palm Beach, Florida, at 34.2%; Northern New Jersey at 33%; and Boston at 32.8%.

“As wage growth trails behind the cost of shelter, Americans are feeling financially distressed,” continue Chen and Le. “With rent growth projected to hover around 2% annually, national RTI will stay mostly flat for the year (29.7%). That is still uncomfortably elevated and only trailing behind last year’s broken record.”