U.S. home rents rose at a slower pace in August, a downshift that may reflect the rise of apartment construction in many major cities.
Median rents rose a seasonally adjusted 3.8 percent from a year ago, off from the annual pace of 4.2 percent in July, real estate firm Zillow said Tuesday. Rental prices are still climbing at a faster pace than average earnings, increasing the financial burden of housing and potentially delaying the accumulation of savings to buy a home.
Rental increases tailed off in several metro areas in August. In Los Angeles, the pace slipped to 4.2 percent from 4.8 percent. Similar slowdowns were seen in Dallas, Philadelphia, Miami, Boston, San Francisco, Phoenix and Denver last month.
The deceleration may reflect the impact of new units coming onto market, which has increased the available supplies and therefore limited how much prices can rise. Construction firms have broken ground on 12.7 percent more apartment buildings this year-to-date, according to the Commerce Department. This includes a 42 percent jump in apartment construction in the Northeast and 25 percent increase in the West.
Still, rental housing costs has been rising nationwide at roughly double wage growth. Average hourly earnings have risen only 2.2 percent over the previous 12 months, according to the Labor Department.
The result is an affordability crunch for renters.
More than a quarter of all renters — 11.2 million households — devoted at least half their incomes to rent in 2013. That figure will likely balloon over the next decade, according to a report released Monday by Harvard University's Joint Center on Housing Studies and the nonprofit Enterprise Community Partners.
If rental costs outpace wage growth by as little as 0.25 percent annually over the next decade, the number of households spending half their income on rent would increase by 1.7 million to 13.5 million. Should rents exceed income growth by a full percentage point each year, the total number of households with more than 50 percent of their income going to rent would be nearly 14.8 million.
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