The pandemic began in the United States following a period of rising home prices and declining interest and vacancy rates. These pressures increased during the pandemic, contributing to higher home prices and rents.
The percentage of household income renter households spent on gross rent (rent plus utilities) — the housing cost ratio — increased nationwide from 2019 to 2021, according to recently released data from the U.S. Census Bureau’s 2021 American Community Survey (ACS).
But renter households with the lowest annual incomes, a population that traditionally has less income available for other essential goods, experienced the largest percentage point increases.
Renters Spent More on Rent Since 2019
The U.S. Census Bureau calculates housing cost ratios for all renter-occupied units that pay cash rent and have positive household income.
In 2021, 20.1 million renter-occupied households met the over 30% income threshold and were cost burdened, an increase of about 1 million households since 2019.
When a household has a cost ratio of over 30%, it is considered cost-burdened, according to the Department of Housing and Urban Development (HUD). Severely cost-burdened households have cost ratios of over 50%.
Cost-burdened households have less money to spend on other critical needs such as food, transportation and child care.
The median cost ratio for all renter-occupied households increased from 29.3% in 2019 to 30.6% in 2021 (Table 1).
This increase shifted the number of households considered cost burdened from 46.3% to 49.0% of all renter-occupied units. That means just under half of all renter-occupied households in the United States were cost burdened in 2021.
In 2021, 20.1 million renter-occupied households met the over 30% income threshold and were cost burdened, an increase of about 1 million households since 2019.
The number of severely burdened households rose to 25.4% (about 10.4 million renter-occupied units) from 23.0% in 2019 (9.4 million).
Renters’ Household Incomes Lower Than Homeowners
Renter-occupied households historically have lower household incomes than owner-occupied households and may be more affected by changes in household income and rental prices.
Categorizing households into five equally sized groups (known as quintiles) from those with the lowest to highest incomes showed that renter-occupied households were more likely than owner-occupied households to be in the lowest income quintiles (Figure 1).
Renter-occupied households made up 52.9% of households in the lowest income quintile and 42.4% of households in the second lowest income quintile. In contrast, only 13.8% of households in the top income quintile were in renter-occupied units.
Low-Income Renters Hardest Hit
Renter-occupied households in the lowest income quintile had a median cost ratio of 62.7% in 2021. That means that half of the renter-occupied households in this quintile paid gross rent that was more than 62.7% of their total household income, 3 percentage points higher than in 2019. (A cost ratio of 62.7% is over twice the HUD cost burden threshold.)
This was the largest percentage-point increase in median rental cost ratio of any income quintile (Figure 2). The second income quintile went up 1.4 percentage points and the third income quintile by 1.0 point. The top two income quintiles had the smallest increases (0.6 and 0.4 percentage points).
For low-income renter households, even a small change in rental costs can have a significant impact on their cost ratios.
For example, while the median housing cost ratio was higher for renter households in the lowest income quintile, the cost ratios were also much more variable for this group than the higher-income quintiles (Figure 2).
This variability reflects the outsized impact of small changes in housing costs and incomes on the cost ratio for those in the lowest-income group compared to those in higher-income groups.
Renter Households at All Income Levels More Likely to be Cost Burdened
Statistics on the number of renter households cost burdened, in addition to the median housing cost ratio, are useful because renters who meet or exceed these thresholds may face hardships meeting basic needs (Table 2).
The lowest-income quintile had the largest number (10.8 million) of cost-burdened renter occupied households, which climbed from 85.5% in 2019 to 87.3% or 10.9 million in 2021.
The numbers were even more striking for the severely cost burdened with a substantial increase in renters in the lowest income quintile paying more than half their income for rent. In 2021, 65.9% of renter-occupied households in the lowest-income quintile were severely cost burdened, an increase of over 500,000 households from 60.9% in 2019.
In addition, 59.9% of renter-occupied households in the second quintile were cost burdened in 2021, up from 55.6% in 2019; 17.3% of them were severely burdened, up from 14.5% in 2019.
In the third quintile, 25.3% were cost burdened, up from 21.8%. Only 3.0% of households in the third income quintile were severely cost burdened in 2021, but that was still higher than the 2.5% in 2019.
Though renter-occupied households in the top income groups were far less likely to be cost burdened, they still experienced significant increases.
The fourth quintile went from 7.4% burdened in 2019 to 8.8% in 2021, and the fifth quintile went from 0.9% to 2.5%. But renter-occupied households in the fourth and fifth income quintiles were rarely severely cost burdened.
Peter J. Mateyka is statistician and Jayne Yoo is an economist in the Census Bureau’s Social, Economic, and Housing Statistics Division.
This article was filed under:
Families and Households
Housing
Income
Income and Poverty
Rental Housing
Related Statistics
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As an expert in housing economics and social statistics, my comprehensive understanding of the factors influencing the housing market and the socio-economic dynamics at play enables me to shed light on the intricacies highlighted in the provided article. Drawing on my wealth of knowledge, I can dissect the key concepts and provide a nuanced perspective on the trends presented.
The article underscores the impact of the pandemic on the housing landscape in the United States, particularly focusing on the interplay between rising home prices, declining interest rates, and vacancy rates. This triad of factors has set the stage for a significant shift in the housing cost burden experienced by renter households, a phenomenon substantiated by the data from the U.S. Census Bureau’s 2021 American Community Survey (ACS).
One crucial concept outlined in the article is the housing cost ratio, which is the percentage of household income that renter households spend on gross rent, inclusive of utilities. A threshold of 30% is considered the point beyond which a household is considered cost-burdened, as defined by the Department of Housing and Urban Development (HUD). Additionally, severely cost-burdened households have ratios exceeding 50%. The data reveals a concerning trend, with an increase in the number of cost-burdened households from 2019 to 2021, reaching 49.0% of all renter-occupied units.
The lowest-income quintile of renter households emerges as the most adversely affected, experiencing the largest percentage-point increases in the median cost ratio. This group, with traditionally limited income for essential goods, faced a 3-percentage-point rise in the median housing cost ratio, reaching 62.7% in 2021. The article emphasizes the significance of even small changes in rental costs for low-income renters, showcasing the heightened variability in their housing cost ratios compared to higher-income groups.
Furthermore, the disparity between renter-occupied and owner-occupied households is a recurring theme. Renter-occupied households consistently exhibit lower median incomes, placing them in the lower income quintiles. The lowest-income quintile, in particular, saw a substantial increase in the number of cost-burdened households, with 87.3% in 2021 compared to 85.5% in 2019.
The statistics provided in the article offer a comprehensive overview of the challenges faced by renter households across income levels. Even in higher-income quintiles, there is evidence of significant increases in the prevalence of cost-burdened households. This insight into the evolving landscape of housing affordability underscores the need for targeted policy interventions to address the growing disparities and challenges faced by renters in the United States.
In conclusion, the data-driven analysis presented in the article, coupled with my expertise in housing economics, provides a well-rounded understanding of the complex issues surrounding housing affordability in the U.S. This information is essential for policymakers, researchers, and anyone seeking to grasp the broader implications of the evolving housing market dynamics.
