Why New Yorkers, Californians and others pay so much rent

Why New Yorkers, Californians and others pay so much rent

US rent payments in the 2010s totaled $4.5T

The U.S. homeownership rate peaked in 2005 at 69.1% and has been falling since

Residential rents in the U.S. increased in 2019 as did the number of tenants, pushing America’s total rent bill to $512 billion, according to a new research report from Zillow. That’s about 10% above the decade’s average.

With most U.S. renters making their final payments of the decade at the start of this month, Zillow used census data and its own to look back at rent payments for the period.

“A bump in the overall number of U.S. renters in 2019 (to 43.6 million), after a slight decline in the previous year, and rent growth itself that has picked up slightly throughout the year both contributed to a higher overall rent bill this year than last,” the report notes.

The U.S. homeownership rate peaked in 2005 at 69.1% and has been falling since, USA Today reported this summer. It’s now 64.2%. According to Governing.com, the rate declined in 99 of the 100 largest metro areas between 2006 and 2013 — a period that included the housing crash and the Great Recession of 2007 to 2009.

Unsurprisingly, the country’s two largest metropolitan areas are the two largest sources of rent payments. New York City renters paying a total of $56.6 billion in 2019, followed by Los Angeles with $39.2 billion — more than twice the total of any other metro in the country.

But low homeownership rates have a lot to do with that. Only about half of New York and Los Angeles metro-area residents own their homes — which is the case in only four the 75 largest metro areas. The other two are in northern California: Fresno and San Jose. Silicon Valley salaries and tight development policies make homeownership extremely costly there.

In part for the same reasons, San Francisco, the 11th-largest metro area, is No. 3 in total rent payments. After spending the first half of the decade neck and neck with Chicago and Washington D.C., San Francisco ($16.4 billion) has since opened up a $1 billion gap between itself and fourth-place Chicago ($15.2 billion). Restrictions on building combined with a tech boom have pushed up rents in San Francisco.

Another factor is that San Francisco and New York City both have rent control, which deters tenants who pay below-market rents from becoming homeowners.

Nearby San Jose, as well as San Diego and Austin, also contribute a disproportionately large share to the nation’s collective rent bill, while Pittsburgh and St. Louis stand out for small total rent payments relative to population — in part because of high home-ownership rates. Nearly 70% of those two metro areas’ residents live in owner-occupied homes.

Meanwhile, Miami appears to have a total rent load in line with its population: It is the country’s seventh-largest metropolitan area and No. 7 in rent payments with $12.3 billion in 2019.

Zillow’s report also notes three markets that have seen the greatest rent growth in the past year: Phoenix (up 7.5 percent), Las Vegas (5.6 percent) and Charlotte (5.5 percent).

The post Why New Yorkers, Californians and others pay so much rent appeared first on The Real Deal Miami.

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