New York City Rent Outpacing Wages
New York City rents are rising faster than wages, according to a new report by the Citizens Budget Commission (CBC). Between 2010 and 2017, rents increased by 15 percent citywide while incomes only rose two percent annually on average. The disparity between wage growth and rent growth is largely responsible for what’s known as “rent-burdened” homes: 40% of all New York City renters spend more than 30% of their monthly income on housing costs alone – a greater burden on their finances than subprime loans or foreclosures caused during the Great Recession.
In its annual report on housing trends, CBC found that average rents have increased by an average of 15 percent citywide since 2015. That’s higher than the 10 percent increase in median income over that period, which means that more and more households are paying more for their rent each month.
The CBC noted that this phenomenon is not unique to New York City; cities across the country are seeing similar patterns as well. However, there are some local differences: While rents have risen across the board, they’ve increased at different rates depending on where you live within Manhattan and Brooklyn.
Since 2010, rents have increased by an average of 15 percent citywide, with the largest increases (23-28%) in the Bronx and Staten Island. On the other hand, median household income has risen much more slowly, averaging just two percent annually since 2012. This means that more and more people are finding themselves unable to afford New York City apartments—more than half of renters spend over 30 percent of their income on rent alone; nationwide this is considered “cost burdened” or something close to it.
At the same time, median household incomes have risen much more slowly, averaging just two percent annually since 2012. This means that while rent in New York City has increased by 15 percent since 2010 (according to the U.S. Census Bureau), average income has only grown by 7 percent (according to The Hamilton Project).
As a result, an increasing number of American families are renting or living with others because they can’t afford to buy their own homes. According to data from Apartment List and NYU’s Furman Center for Real Estate & Urban Policy, half of renters spend more than 30 percent of their monthly income on rent alone—a threshold for housing affordability established by Harvard researchers in 2014—and one-third spend over half their monthly paycheck on rent alone.
Rent Burdened Homes
This has pushed 40 percent of all New York City renters into what’s known as “rent-burdened” homes. Rent-burdened homes are defined as those where rent accounts for more than 30 percent of monthly income. In other words, you’re spending a third or more of your paycheck on rent every month. This can be especially hard on low-income residents who live in the most expensive parts of Manhattan—and it’s not just an issue in NYC: in 2015, nearly half (47%) of all renters nationwide were paying well over 30 percent towards their monthly housing costs, according to Harvard University’s Joint Center for Housing Studies report. In these homes, rent accounts for more than 30% of monthly income-a greater burden on their finances.
Rent burdened households are more likely to have difficulty paying for other necessities. These include health care, child care and transportation. They may need to make sacrifices in order to pay rent, like skipping a meal or not filling prescriptions. A rent-burdened household can also choose to work multiple jobs in order to pay their rent while still having enough left over for other necessities of life.
While subprime loans and foreclosures caused housing prices to drop dramatically between 2007 and 2009, they have since recovered and continue to rise annually even though incomes remain stagnant. In New York, the average rent (excluding utilities) rose 38 percent between 2002 and 2015, while wages grew by only 25 percent in that time. In other words, rents have outpaced income growth by 13 percentage points. To put this into perspective: a $1 increase in your hourly wage translates to an extra $20 per week; however, if the average rent for your neighborhood increases by just 20 cents per square foot—a 0.1% increase—your monthly payment will go up by approximately $160 per month for every 100 square feet of space you occupy.
Renters in other cities have seen similar jumps: In San Francisco, rents have risen 52% since 2002 while wages have increased 42%; Seattle saw rents rise 39% compared with 29% growth in wages; Boston’s average rent has gone up 44%, while its median wage has risen 21%.
The rising cost of rent is outpacing wage growth throughout New York City. While rent has increased throughout the city, some areas have seen much larger increases. In those places, such as the Bronx and Staten Island, rents have risen by an average of 23 percent since 1999. The rate of growth in these boroughs was consistently higher than that of New York City as a whole. In Manhattan, rents rose by 28 percent between 1999 and 2018 (to $3,536), while Brooklyn saw a 25% increase ($2,734).
In addition to rising faster than wages over time – which have increased just 13 percent over that period – housing costs have also outpaced inflation: in 2019 dollars they have risen 43% since 1999 (for example: if you made $50k/year then but now earn $65k/year after having been promoted).
In many ways, the data on rents in New York City is not surprising. We know that the cost of living has been rising and outpacing wage growth for years. However, the CBC’s new report provides concrete evidence that this trend is continuing even as wages begin to rise again after stagnating during the recession. This disparity between rent and wages means that more families are struggling to afford their homes today than ever before.