Rents decline offers limited relief amid rising wages

Renters in the United States are experiencing some relief as rents decreased in November, according to a recent report by Realtor.com. The median rent across the 50 largest metropolitan areas was $1,703, marking a $17 drop from the previous month and a $57 decline from its peak in August 2022.

The reduction is part of a broader trend where rents for 0-2 bedroom properties have fallen by 1.1% year over year. "As the rental market has cooled, rents have fallen for 16 consecutive months nationwide," stated Realtor.com economist Jiayi Xu.

Despite this positive development, renters earning minimum wage still face significant challenges. Even with declining rents, they often need to work long hours to afford housing costs within their budget. In eight out of ten markets analyzed, two minimum-wage workers splitting rent would need to work more than 40 hours per week to keep housing costs manageable.

Nashville and Austin top the list of cities where minimum-wage earners must work excessive hours—82 and 79 hours per week respectively—to afford typical rental costs. "Affordability remains a significant challenge in rental markets, particularly for low-income groups," noted Xu.

Conversely, cities like Denver and Phoenix offer better affordability for minimum-wage earners who can manage with fewer than 40 hours of work per week for similar rentals. Minneapolis and Seattle also provide some relief with approximately 37-hour workweeks needed to cover rental expenses.

Xu highlights that disparities in working hours across different cities are mainly due to varying minimum-wage laws. For instance, Seattle's local law sets the minimum wage at $19.97 per hour compared to Tennessee's adherence to the federal rate of $7.25 per hour.

Looking ahead to January 2025, scheduled increases in minimum wages across several metros could ease burdens further if rent levels remain stable. St. Louis and Kansas City are expected to see notable reductions in weekly working hours required for rent affordability.

While falling rents combined with rising wages offer hope for many renters, regional differences continue to impact overall affordability significantly. Markets maintaining the federal minimum wage will likely see ongoing struggles despite these improvements.

"The relative steadiness in rents should translate into slower shelter inflation in the months ahead," says Xu. This stability is crucial given housing costs' substantial influence on consumer price indices.

Yet challenges persist as even higher state or local minimum-wage laws necessitate working beyond standard full-time hours in some regions like San Francisco and San Diego.