Housing market sees rent costs rise faster than home values in 2023

The cost of rent and utilities in 2023 rose faster than home values for the first time in a decade, the latest sign that a distorted housing market has pushed more people into renting.

That’s one takeaway from the 2023 American Community Survey, released Thursday by the Census Bureau, which also underscored how different people’s experiences in the housing market can be depending on income and race. From 2011 to 2019, real rent costs rose less than 3 percent every year, the data shows. In 2022, after peaking during the coronavirus pandemic, rent grew 1 percent. But last year, rent rose 3.8 percent, compared with a 1.8 percent rise in inflation-adjusted median home values. The findings are yet another example of how a supercharged rental market is squeezing people who also can’t afford to buy.

The data comes as housing has emerged as a dominant economic and political issue, both in the run-up to the presidential election and in the broader context of the world since the coronavirus emerged. Ever since the pandemic upended housing markets nationwide, the financial strain of renting a home or getting a mortgage has weighed heavily for struggling households, turning what was once a bedrock of the American Dream into a chief source of economic insecurity.

Zoomed out, the economy is still on strong footing, with inflation easing to normal levels and no recession on the horizon. But the ACS survey — a closely studied snapshot of housing, poverty and more — highlights how bifurcated that picture remains. Despite rising costs, incomes generally kept up with rent increases, possibly reflecting the fact that wealthier people are choosing renting over buying.

But at the same time, the Census Bureau found that nearly half of the nation’s 42.5 million renter households spent more than 30 percent of their income on housing costs in 2023, a threshold that considers them to be “cost-burdened.” (Those figures were roughly in line with those of 2022.)

Among Black renter households, more than 56 percent were cost-burdened, for a total of 4.6 million. Among Hispanic renter households, more than 53 percent were cost-burdened, along with nearly 47 percent of White renter households.

Costs went up for homeowners, too, in part because of insurance. Some 5.4 million of the nation’s 85.7 million homeowners paid $4,000 a year or more for insurance in 2023. Florida had the highest number (1.2 million), followed by Texas (784,000), California (560,000), New York (272,000) and Louisiana (215,000).

Housing costs went into overdrive on the heels of the pandemic, as the Federal Reserve slashed interest rates, mortgage rates plummeted, and people suddenly changed where they wanted to live and work. The tumult put enormous pressure on housing markets in areas such as New York’s Hudson Valley; Austin; and Boise, Idaho, which didn’t have enough available homes to meet demand, sending prices up.

But economists and housing experts broadly agree that the United States’ housing problems are more structural, stretching back to the Great Recession, when the housing market crumbled and construction of new houses slowed. Now politicians focused on housing say the country needs more homes to get affordability in check.

Building on moves from the Biden administration, Vice President Kamala Harris, the Democratic presidential nominee, talks about building 3 million more homes if elected, combined with offering large tax credits to help buyers get into the market. Former president and GOP nominee Donald Trump, meanwhile, says his plans to deport undocumented immigrants will open up housing supply.

“We have a shortage of homes and housing,” Harris said during Tuesday’s presidential debate. “And the cost of housing is too expensive for far too many people.”