While inflation in most sectors of the economy has improved over the last year, the cost of shelter in the U.S. continues to remain high for many consumers. Inflation data released by the Bureau of Labor Statistics in October 2023 revealed that while the Consumer Price Index overall was up 3.7% year-over-year, the index for shelter had risen 7.2% over the same span. Increasing rent prices have been a major reason why.
The dynamics of the rental market in recent years largely reflect simple supply and demand. In the years following the housing crash and Great Recession, the number of new housing projects plummeted and were slow to recover over the course of the 2010s. Around the same time, the Millennial generation—America’s largest, with more than 72 million members—began to reach adulthood, introducing greater demand in the market.
Buy/sell, rent/lease residential &
commercials real estate properties.
Economic conditions during the COVID-19 pandemic have exacerbated issues with the rental market. As fast-rising real estate values priced more people out of homebuying, rental markets became more competitive among consumers. On the supply side, inflation in the cost of materials, rising interest rates, and tightness in the labor market have all contributed to difficulties in developing new housing stock.
Rental Supply & Prices Over Time
A historically tight rental market drove prices up at the fastest rate since the 1980s
Source: Construction Coverage analysis of U.S. Bureau of Labor Statistics data | Image Credit: Construction Coverage
All of these issues have come to a head over the last couple of years. The combined crunch of limited supply and high demand have driven the national rental vacancy rate—a key metric used to track the availability of rental housing—to its lowest levels since the late 1980s. With fewer units available, prices have risen dramatically. The year-over-year change in rental prices leaped from a recent low of 1.8% in Q2 2021 to 8.6% in Q2 2023.
Residential Rent Prices by Location
Top coastal states are about twice as expensive as the Midwest for renters
Source: Construction Coverage analysis of U.S. Department of Housing and Urban Development data | Image Credit: Construction Coverage
However, the impact of rent increases has not been felt evenly across the U.S., as renters in some locations face much higher costs than in others. Recently released data from the Department of Housing and Urban Development (HUD) shows that nine states have median market rents topping $2,000 per month, led by California at $2,690. On top of national supply and demand dynamics, many of the most expensive locations face more intense demand due to strong local economies alongside more severe supply constraints resulting from laws and regulations that make it difficult to add housing.
The most expensive states are, unsurprisingly, also home to some of the nation’s most expensive metropolitan areas for renters. California is home to all of the top 10 most expensive metros overall, with San Jose ($3,451) leading the large metro cohort, Salinas ($3,353) leading the midsize cohort, and Santa Cruz ($4,134) leading the small cohort. Other major metros like Boston, Seattle, and New York are not far behind.
The analysis was conducted by researchers at Construction Coverage, a website that provides construction insurance guides, using data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Here is a summary of the data for Pennsylvania:
- Median rent overall: $1,458
- Median studio rent: $1,070
- Median 1-br rent: $1,183
- Median 2-br rent: $1,443
- Median 3-br rent: $1,806
- Median 4-br rent: $2,011
For reference, here are the statistics for the entire United States:
- Median rent overall: $1,782
- Median studio rent: $1,307
- Median 1-br rent: $1,423
- Median 2-br rent: $1,716
- Median 3-br rent: $2,227
- Median 4-br rent: $2,575
For more information, a detailed methodology, and complete results, see U.S. Cities With the Highest Rent Prices on Construction Coverage.