U.S. Housing Costs Increase in 2023

(Reuters) – The median cost of housing for both U.S. renters and homeowners rose last year. The Census Bureau reported that while the share of income renters allocated to housing remained stable, the extent of cost-burden differed by race.

Over 21 million renter households spent more than 30% of their income on housing costs in 2023, representing 49.7% of calculated rent-burdened households. Despite rising rental costs, the median share of renter income spent on rent and utilities held steady at 31.0%, unchanged from 2022. This may indicate that renter household incomes kept pace with rising rents or that higher-income families are renting more frequently.

According to the Census data, 56.2% of Black or African American renter households paid over 30% of their income on housing in 2023. Comparatively, 54.7% of households defined as “Some Other Race” exceeded that threshold, while 46.7% of white renter households did so. Asian households faced the least burden.

Real median rental costs, calculated as rent plus average monthly utility costs adjusted for inflation, increased by 3.8% last year, whereas real median home values rose by 1.8%. Historically, from 2011 to 2019, real rental costs grew by less than 3.0%. In 2022, rent increased by just 1.0%.

The Census also noted that rental costs adjusted for inflation surpassed the rise in home values for the first time in a decade. Although homeowners typically experience a lower housing cost burden than renters, they face significant expenses, particularly with insurance.

In response to high inflation, the Federal Reserve raised its benchmark interest rate from near zero to over 5% between March 2022 and last July. This action caused mortgage rates to spike to their highest levels in about 20 years, affecting the housing purchase market and reducing the number of buyers. Consequently, with more individuals turning to renting amid high inflation, shelter costs increased significantly in 2023, complicating the effort to bring inflation down to the central bank’s target rate of 2%.

Despite high interest rates, the economy rebounded to pre-pandemic growth levels last year, with significant job growth, rising real household income, and inflation easing to 2.6% by December.