Rent is Becoming Less Affordable for College Graduates

SAN FRANCISCO, May 9, 2019 /PRNewswire/ -- Rising rents and slow income growth are making it harder for early-career renters to afford housing, according to a new HotPads® analysisⁱ. In fact, the rent burden has grown more quickly for recent college graduates in 45 majors – including U.S. history, music, biology and early childhood education – than it has for renters without a four-year degree.

The current U.S. median rent is $1,535 per month, up 29.9 percent over the past 10 years. In that time, the median income for early-career renters has grown 14.4 percent – the current median annual income is $40,673 for early-career renters with a four-year degree and $24,298 for those without one. The amount of student debt in the United States has also more than doubled in the last 10 yearsⁱⁱ – 62 percent of 18- to 29-year-old Bachelor's degree graduates took on debt for their education in 2018, according to the Federal Reserveⁱⁱⁱ.

As rent prices outpace incomes, the rent burden has gotten worse – a typical recent graduate would have to spend 45.3 percent of his or her income to pay the median rent, up from 40.5 percent in 2009. A typical renter without a four-year degree would spend 75.8 percent of each paycheck on the median rent, up from 67.9 percent in 2009.

While non-graduates have a higher rent burden than four-year college graduates, some degrees have had slower income gains – or even decreases – in the past decade. For renters with these degrees, housing affordability is deteriorating faster than it is for renters who didn't graduate from a four-year college.

U.S. history graduates have seen one of the largest changes in rent affordability in the past 10 years – their rent burden has grown by 22 percentage points as their early-career median annual income dropped 14.5 percent. Recent graduates with music, biology and early childhood education degrees have seen less than 10 percent increases in their incomes over the past 10 years, and their rent burden grew by more than 10 percentage points in that time frame.

Experts typically recommend spending no more than 30 percent of annual income on housing. Nationally, only early-career graduates with one of 17 majors analyzed – including computer science and various engineering degrees – have a rent burden of 30 percent or less.

 

10 College Majors with the Smallest Rent Burdens
Rank	Major	Median Entry-Level Income	Rent Burden, 2019
1	Mining and Mineral Engineering	$75,854	24.3%
2	Materials Engineering and Materials Science	$69,963	26.3%
3	Applied Mathematics	$68,669	26.8%
4	Computer Engineering	$68,669	26.8%
5	Electrical Engineering	$68,669	26.8%
6	Aerospace Engineering	$67,613	27.2%
7	Mechanical Engineering	$66,556	27.7%
8	Industrial and Manufacturing Engineering	$65,503	28.1%
9	Computer Science	$65,500	28.1%
10	Nuclear Engineering	$63,646	28.9%

 

10 College Majors with the Largest Rent Burdens
Rank	Major	Median Entry-Level Income	Rent Burden, 2019
1	Studio Arts	$24,217	76.1%
2	Counseling Psychology	$24,568	75.0%
3	Linguistics and Comparative Language and Literature	$25,824	71.3%
4	Humanities	$26,212	70.3%
5	Miscellaneous Fine Arts	$26,411	69.7%
6	Music	$26,411	69.7%
7	Drama and Theater Arts	$26,411	69.7%
8	Ecology	$26,577	69.3%
9	Industrial and Organizational Psychology	$26,689	69.0%
10	Botany	$27,789	66.3%

As renters spend more of their income on housing, many of them have found ways to cut back on expenses to lower their rent burden, such as getting roommates or moving back home with their parents.

"As rent prices and student debts rise, affordability concerns for recent college graduates have garnered attention on the national stage," said Joshua Clark, economist at HotPads. "Graduating from college still typically pays off in the long run, but slower wage growth for college graduates and rising costs have dampened the immediate financial benefits associated with a four-year degree. As renters consider their career interests and their short-term costs of living, where and how they live post-graduation can have more of an impact on their finances now than ever before."

Of the 50 largest metro areas, Sacramento had the most significant change in rent affordability for four-year college graduates in the past decade. In 2009, the rent burden for an early-career graduate in Sacramento was 47 percent; now it's 75.9 percent. The median rent in Sacramento rose 46.4 percent over the past 10 years, while the median income for early-career graduates fell 9.4 percent.

For early-career renters without a four-year degree, high-cost California markets have grown increasingly unaffordable over the last 10 years. Even in 2009, early-career renters without a four-year degree would have needed to spend more than 100 percent of their income to pay the median rent alone in San Francisco, San Jose or Los Angeles. Today, they would need to spend more than 150 percent of their income to live alone in a typical rental in one of these metro areas.

For more information on this analysis, including data on additional college majors at the metro level, visit HotPads.com.

		Early-Career Four-Year College Graduates		Early-Career, No Four- Year Degree
Metropolitan Area	Median Rent	Rent Burden, 2009	Rent Burden, 2019	Rent Burden, 2009	Rent Burden, 2019
United States	$1,535	40.5%	45.3%	67.9%	75.8%
New York, NY	$2,380	55.7%	60.1%	103.2%	117.5%
Los Angeles-Long Beach-Anaheim, CA	$2,965	64.6%	88.6%	123.3%	153.1%
Chicago, IL	$1,790	44.2%	50.6%	83.9%	84.7%
Dallas-Fort Worth, TX	$1,690	36.9%	45.7%	74.1%	76.8%
Philadelphia, PA	$1,690	45.0%	48.0%	72.5%	76.8%
Houston, TX	$1,585	35.5%	41.1%	71.1%	75.0%
Washington, DC	$2,180	53.8%	51.6%	93.4%	103.2%
Miami-Fort Lauderdale, FL	$2,035	55.4%	77.1%	88.6%	105.1%
Atlanta, GA	$1,490	36.0%	42.3%	64.8%	76.9%
Boston, MA	$2,425	52.7%	61.2%	91.6%	110.2%
San Francisco, CA	$3,540	62.4%	73.1%	109.3%	160.8%
Detroit, MI	$1,305	36.8%	34.8%	63.3%	64.4%
Riverside, CA	$1,990	50.4%	71.8%	88.3%	98.3%
Phoenix, AZ	$1,520	34.1%	43.2%	54.8%	71.9%
Seattle, WA	$2,255	46.6%	53.4%	68.1%	95.2%
Minneapolis-St Paul, MN	$1,705	43.0%	51.0%	66.3%	77.5%
San Diego, CA	$2,740	58.6%	81.9%	91.5%	129.7%
St. Louis, MO	$1,210	37.9%	39.3%	56.0%	59.7%
Tampa, FL	$1,490	39.8%	52.9%	63.2%	77.0%
Baltimore, MD	$1,750	46.3%	49.7%	72.6%	89.4%
Denver, CO	$2,125	50.0%	60.6%	75.0%	89.4%
Pittsburgh, PA	$1,110	28.6%	34.2%	49.1%	56.4%
Portland, OR	$1,945	50.7%	60.9%	76.4%	92.1%
Charlotte, NC	$1,405	38.5%	43.1%	61.6%	69.4%
Sacramento, CA	$2,005	47.0%	75.9%	68.5%	99.0%
San Antonio, TX	$1,390	37.4%	43.9%	68.8%	75.2%
Orlando, FL	$1,550	42.0%	53.4%	67.0%	88.0%
Cincinnati, OH	$1,245	32.2%	35.4%	56.8%	56.6%
Cleveland, OH	$1,215	33.6%	36.1%	64.6%	65.2%
Kansas City, MO	$1,260	35.5%	35.8%	57.1%	57.2%
Las Vegas, NV	$1,445	38.2%	44.1%	52.9%	67.3%
Columbus, OH	$1,465	38.8%	46.2%	66.0%	72.4%
Indianapolis, IN	$1,245	34.2%	37.1%	55.8%	60.6%
San Jose, CA	$3,725	52.9%	70.5%	110.7%	157.5%
Austin, TX	$1,760	48.7%	50.0%	77.9%	80.0%
Virginia Beach, VA	$1,490	50.2%	45.7%	60.1%	68.9%
Nashville, TN	$1,515	42.6%	49.2%	62.3%	68.8%
Providence, RI	$1,790	46.0%	53.5%	67.1%	81.3%
Milwaukee, WI	$1,390	45.8%	39.5%	66.5%	65.8%
Jacksonville, FL	$1,410	44.2%	45.8%	60.3%	72.8%
Memphis, TN	$1,050	39.2%	34.1%	64.5%	59.6%
Oklahoma City, OK	$1,125	37.0%	36.5%	57.9%	60.6%
Louisville-Jefferson County, KY	$1,145	33.8%	37.2%	54.1%	52.0%
Hartford, CT	$1,670	38.0%	45.2%	77.2%	73.1%
Richmond, VA	$1,465	40.5%	45.0%	59.1%	75.6%
New Orleans, LA	$1,455	41.2%	42.9%	71.2%	79.5%
Buffalo, NY	$1,300	40.7%	37.9%	56.1%	62.1%
Raleigh, NC	$1,490	40.2%	45.1%	70.3%	78.5%
Birmingham, AL	$1,060	29.9%	31.7%	52.4%	52.3%
Salt Lake City, UT	$1,635	48.0%	53.1%	65.5%	74.3%

 

HotPads
HotPads is an efficient rental search platform for urban areas across the United States, with features designed for competitive markets such as map-based search, real-time notifications and detailed information on landlords and property managers that help renters spend less time searching and more time feeling excited about their next home.

Launched in 2005, HotPads is based in San Francisco and is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG).

HotPads is a registered trademark of Zillow, Inc.

ⁱ HotPads analyzed its rent data and income data from the U.S. Census Bureau's American Community Survey to calculate the rent burden – the share of a renter's income spent on housing – for renters with and without a four-year college degree. Data are available for early and mid-career renters and for more than 170 majors where data are collected by the ACS and made available by the University of Minnesota, IPUMS-USA. For more information, email [e-mail].
ⁱⁱ Data from Experian, Q3 2018. https://www.experian.com/blogs/ask-experian/state-of-student-loan-debt/
ⁱⁱⁱ https://www.federalreserve.gov/publications/2018-economic-well-being-of-us-households-in-2017-student-loans.htm

 

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