September 12th, 2023

Recently, a viral video made the rounds on TikTok and Twitter claiming rent prices have grown 5x as much compared to incomes since 1985. The problem is the red figure for rent, is not adjusted for inflation, whereas the blue series for household income, is adjusted for inflation. So, the gap between the rent price and income in the graph is mostly reflecting the rise in inflation since 1985.

The original source for the graph appears to be (or at least follows the same methodology as) a 2022 article from RealEstateWitch. The methodology at the bottom mentions using “real” median income, but there is no mention of any inflation adjustment to the rental data.

RealEstateWitch median rents
Census Median Rent

I went to HUD’s website and downloaded the same historical data series. Comparing the RealEstateWitch’s claim for 1985 rents for a 2-bedroom dwelling, with my own calculations of the median rent, and we both get the exact same figure of $340. We can compare this with Census data for median rents. In 1990, the Census shows rents were $447, in 1990 dollars. RealEstateWitch shows $430. If we were to change that into 2023 dollars, $430 in 1990 would be the equivalent of $1,009.76. In short, the this demonstrates the viral video does not adjust for inflation.

I’m a little skeptical of how the HUD data was calculated and used. And unfortunately, the census data for median rents only comes every ten years. So, I replicate the same graph, but use CPI: Rents as a measure of inflation. The primary drawback is that this is for mean rents, not median rents. Of course, given the inequality skew, means > median. Therefore, this will demonstrate a higher unaffordability compared to median rents.

Nominal Rents compared to Real Incomes. Most of the gap is simply inflation, not unaffordability.
Nominal Rents compared to Nominal Incomes. Now the gap demonstrates unaffordability.

There is a problematic unaffordability gap since the Great Financial Crisis, but not catastrophic like the earlier claims.

Some want to know about affordability at different areas of society. While the median family is living under potential, but not destitute. How is rent affordability for the poorest among us?

Historically consistent data is much harder to come by. I found a calculations by Albouy, Ehrlich, & Liu (2016). While the good news is that homeownership has remained constant; the bad news is that the percent of rent burdened households has gone up dramatically. Rather than around 11% of the population paying more than 30% of their income on rent in 1970, after 2010, that number jumped to over 18%. (Note, the left vertical axis is a percent of the rent population, so we’ll need to change the denomitator to get it as a percent of the population.)

100*(0.3)*(1-0.62)=11.4%

100*(0.5)*(1-0.64)=18%

Housing affordability remains a serious problem. Accurately describing it is a vital component to the solution.