The rent has been "too damn high" in New York for so long that today's young professionals might assume it was always that way. Yet it wasn't until the second quarter of 2004 that the median rent exceeded 30 percent of the median household income for young workers, the threshold at which housing experts say rent is no longer affordable, according to an analysis conducted by Zillow.
Rents are stretching millennial budgets throughout the U.S. Nationally, the typical worker from 22 to 34 years old paid 30 percent of income for rent in the first quarter of 2015, up from 23 percent in 1979, when the analysis begins.1 In those places, rental unaffordability is a distinct obstacle for people trying to carve out lives and careers, particularly in the nine major cities shown in the chart below, where more than half of households rent.
The median rent in Los Angeles has been out of the reach of young people since at least the Carter administration. Chicago, by contrast, was affordable for the typical young worker until 2012, the year Kanye West first appeared on Keeping Up With the Kardashians. Most millennials could responsibly budget for rent in Boston as recently as 2004, when the Red Sox broke the team's long World Series drought. San Francisco dipped in and out of unaffordable territory for years, until—after roughly a decade of affordability—rents shot ahead of millennial incomes in 2003; they have continued to outpace salaries ever since.
A couple of forces are making major cities increasingly unaffordable for millennials at the outset of their working lives. Stagnant wages in many cities have made rental and for-sale housing harder for workers to afford.
Demand for leases has also outweighed supply in many places. In the nine cities shown on the map below, the number of renters is growing faster than the number of rental units, according to a report published in May by the Furman Center for Real Estate and Urban Policy at New York University. That trend is likely to continue if predictions for falling homeownership rates are realized.
For many cities, the affordability gap hasn't been a growth-killer; in many, it's a consequence of their sustained popularity. People continue to flock to San Francisco for opportunities in its technology industry, despite median rents that were unaffordable to young workers for the first time in 1982. Looming rental affordability problems in Dallas and Houston are probably the result of booming local economies that have attracted workers faster than builders can erect new housing.
Not unexpectedly, the poor have suffered most from the dearth of reasonably priced housing. In 2013, 60 percent of low-income renters were severely rent-burdened, meaning they spent more than half their income on rent, according to the Furman report. Middle-class renters are also struggling to find affordable housing: More than one-third of moderate-income renters were severely rent-burdened in Boston, Los Angeles, Miami, and New York.
The 30 percent threshold, it should be noted, is merely a proxy for affordability. Transportation costs, which are typically the second-biggest expense in most household budgets, can vary greatly for workers who take public transit and for those who carry car payments and auto insurance. That makes renting in Los Angeles look especially unappealing.
Millennials, meanwhile, can look forward to longer commutes and a harder time putting money away for a mortgage downpayment. Or move to Missouri.