Half-Century Perspective | Rental Inflation

Data as of October 1st, 2024.

To find a time when rental inflation was this high, you have to go back to 1987.

The rise in rental inflation over the past few years has significantly increased the cost of living for many Americans. As a result, we've decided to dive into this metric to explore its implications for Americans.

Historical View

Over the past 50 years, the average year-over-year change in rent CPI has been 4.18 percent. However, this figure is skewed by the periods in the 1970s and 1980s that experienced substantial rental inflation, as well as the past few years.

In the 1970s, alongside significant home price appreciation, rental inflation averaged 5.96 percent. In the 1980s, it averaged 5.39 percent.

It's important to note that during this period, home prices increased substantially. Given the significant increases in other areas of the housing market and affordability challenges similar to what we are seeing today, there was considerable upward pressure on rents across the U.S., as many turned to renting rather than homeownership.

Current Picture

More recently, over the past 20 years, rental inflation has averaged 3.46 percent, and over the last 10 years, it has been running at 4.18 percent.

With the most recent data showing a 4.97 percent increase, we are still running above historical averages. However, it’s important to recognize that multiple factors have contributed to these figures, including broad-based inflation across all housing sectors, similar to the dynamics of the 1970s and 1980s mentioned earlier.

Lower-income households often opt to rent, as the barriers to entry are lower compared to homeownership. These levels of rental inflation can put significant financial strain on low-income households, and many resort to using credit cards to meet their needs.