The combination of softening rents and rising wages have improved rental affordability for college grads
(NASDAQ: RDFN) — The typical recent college grad in the Bay Area who wanted to live in a 2 bedroom apartment with a roommate last year was rent burdened—meaning they’d need to spend over 30% of their income on rent—but that’s no longer the case. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.
In San Jose, the typical recent college grad would now need to spend 27.8% of their income to rent the median priced 2 bedroom apartment, assuming they’re splitting rent evenly with a roommate. That’s down from 30.9% in 2023. There are only two other places among the 33 U.S. metropolitan areas Redfin analyzed that flipped to affordable from unaffordable for college grads looking to live with a roommate: San Francisco (26.9% from 31.4%) and Sacramento, CA (27.8% from 30.6%).
Redfin analyzed apartment asking rents from Redfin.com and Rent.com through July 2024, and estimated 2024 salaries for employed college graduates aged 22-29 (“recent college grads”) using U.S. Census Bureau data. We define an “affordable” rental as one where the asking rent is no more than 30% of the estimated income for recent college grads. An “unaffordable” listing is one above the 30% cutoff, meaning recent college grads would be “rent burdened.”
The Bay Area has the highest salaries for college grads in the nation, and while it’s still one of the most expensive places to rent in the U.S., rents are softening. The typical recent college grad in San Jose makes an estimated $108,499—the highest among the metros Redfin analyzed. And the median 2 bedroom asking rent in San Jose fell 1.8% year over year, helping college grads become unburdened by rent. The story is similar in San Francisco, which has the second highest salary for recent grads ($84,388) and saw one of the steepest declines in asking rents (-6.7%).
“A lot of college grads in the Bay Area are working high-paid Silicon Valley tech jobs, which is why they can afford to live in the most expensive place in America,” said Redfin Senior Economist Sheharyar Bokhari. “But affordability remains a huge problem in the Bay Area— which has one of the highest rates of homelessness in the nation—in part because there is a major shortage of housing.”
The Typical Recent U.S. College Grad Can Afford Rent If They Live With a Roommate, But Can’t If They Live Alone
The typical recent U.S. college grad would need to spend 20.6% of their income to rent the $1,725 median priced 2 bedroom apartment, assuming they’re splitting rent evenly with a roommate. That’s down from 22.6% last year.
Affordability has also improved for college grads looking to live alone. To rent the $1,495 median priced 0-1 bedroom apartment, the typical recent grad would need to spend 35.7% of their income, down from 39% in 2023.
“Rents are falling in many parts of the country at the same time that wages are rising. That’s why college grads are less likely to be rent burdened than they were last year,” Bokhari said. “But many Americans, especially those without college degrees, are still struggling to cover rent and are also grappling with increasing utility costs.”
The median U.S. asking rent for 0-1 bedroom apartments fell 0.3% year over year to $1,495 during the three months ending July 31, while the median asking rent for 2 bedroom apartments fell 0.7% to $1,725. Meanwhile, wages have climbed; the median salary for recent college grads is an estimated $60,277, up 9% from $55,300 last year.
America’s renter population is growing three times faster than its homeowner population, in part because the affordability crunch isn’t quite as severe in the rental market. Nearly two in five U.S. renters don’t believe they’ll ever own a home, up from roughly one-quarter in 2023, according to a recent Redfin-commissioned survey.
In Austin, The Typical Recent College Grad Can Now Afford to Live Alone
Austin, TX was the only metro Redfin analyzed that flipped to affordable from unaffordable for recent college grads looking to live on their own.
The typical recent college grad in Austin would need to spend 28.3% of their income to rent the median priced 0-1 bedroom apartment, down from 35.2% last year, meaning the typical recent grad is no longer rent burdened if they want to live alone.
That’s largely because rents have cooled rapidly in the Texas capital; the median asking rent for 0-1 bedroom apartments in Austin dropped 12.6% year over year during the three months ending July 31—one of the biggest decreases in the nation.
Homebuying costs have also cooled, but not enough to make starter homes affordable. A family in Austin needs to earn $117,781 to afford the median priced starter home, a separate Redfin report found. That’s down 2.5% from a year ago, making it the only major metro that saw a decline. Still, an Austin household earning the local median income can’t afford a starter home.
"Students who graduate from university in Austin—or in parts of the Midwest where rents have always been low—have an advantage because they can typically afford rent in the same town where they went to school," said Redfin Chief Economist Daryl Fairweather. "But college grads in places like New York, Los Angeles and Boston may have tougher decisions to make. While those places are home to highly regarded universities, graduates will have a harder time finding a local job that pays the rent. They can move to a different city, but then they risk losing their social network and professional connections from college."
These Are the Metros Where Rent Is Most Affordable for Recent College Grads
In Cincinnati, the typical recent college grad would need to spend 16.9% of their income to rent the median priced 2 bedroom apartment, assuming they’re splitting rent evenly with a roommate. That’s the lowest share among the metros Redfin analyzed. Next came Houston (17.2%), Austin (17.2%), Detroit (17.3%) and Indianapolis (18.5%).
On the other end of the spectrum, here are the six metros where recent college grads with roommates are rent burdened: Los Angeles (35.9%), New York (35.3%), San Diego (32.6%), Riverside, CA (32.3%), Boston (31.7%) and Miami (31%).
The list of most affordable metros is similar for grads who want to live alone, though there are only four metros where the typical recent grad wouldn’t be rent burdened. In Houston, the typical recent college graduate would need to spend 27% of their income to rent the median priced 0-1 bedroom apartment—the lowest share among the metros Redfin analyzed. It’s followed by Detroit (27.8%), Austin (28.3%) and Cincinnati (29.9%).
The least affordable metro for solo grads is New York, where the typical recent grad would need to spend 56.2% of their income to rent the median priced 0-1 bedroom apartment—the highest share among the metros Redfin analyzed. Next came four other metros in expensive coastal states: Los Angeles (54.9%), Boston (54.8%), Riverside (54.4%) and San Diego (53.7%).
To view the full report, including methodology and more metro-level data please visit: https://www.redfin.com/news/college-grad-rent-burden-2024
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.
For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240905557310/en/
Contacts
Contact Redfin
Redfin Journalist Services:
Kenneth Applewhaite
press@redfin.com