The Great Reshuffling has been a wonderful opportunity for the millions of remote workers who can now shop for homes in less expensive markets. However, occupations that require in-person work — such as teachers and nurses — are limited by the supply and the price range in their area, making affordability more of a challenge. A new Zillow analysis shows that many renters with in-person jobs are battling over a small slice of the rental market comprising smaller, older homes.
"Many renters have been able to keep costs low even as prices have grown over the past several years, but merely affording rent does not mean they are thriving," said Zillow economic data analyst Nicole Bachaud. "A deeper look shows a big slice of the market is out of reach for workers looking to maintain a comfortable rent burden. That often means renting an older home with less space but a smaller price tag, or doubling up with roommates or a partner."
New construction in the U.S. has fallen by millions of homes since the Great Recession, fueling record home value growth and increasing pressure on the rental market. More than a decade of underbuilding has had a severe impact on renters, who are now overpaying to live in older, run-down housing.
Typically, renters will try to save money on rent by living with roommates or a partner, or targeting less desirable housing to make housing costs manageable. According to the Zillow report, the typical teacher spends about 22% of their income on rent, which is well below the widely accepted 30% rule for affordability. Teachers have managed to keep living affordability, despite the fact rent has grown 24% over the past five years. But to keep their rent costs low, they have to search for housing within a fraction of the rental market.
In Boston, a very expensive metro city, on average, teachers spend 18.5% of their income on rent, down from 20% in 2016. However, they can only afford to select from 6% of rentals in Boston that are priced low enough. Typically these homes are 300 square feet smaller and 33 years older than the typical Boston rental, increasing the likelihood of safety and health hazards.
In Tampa, Florida, however, teachers are finding it hard to cope with rising rental costs. Teachers' monthly rental payments hover just below the 30% affordability threshold at 28%, which is quite a shock coming from the 17.2% they spent five years ago.
"Boosting supply is the clearest path to improving affordability," Bachaud added. "Allowing for even small amounts of new density could have a big impact on prices."
Zillow researchers suggest that communities can lower price pressure by relaxing zoning restrictions to ensure more housing is built. Even modest densification could significantly slow housing price growth in the long term.
Nurses who live affordability in metros areas, according to the 30% threshold rule, are renting homes at least 100 square feet smaller than the average rental in each market. In San Diego, only 8% of rentals are affordable to the average nurse who spends 24.5% of their income on rent.
One of the most affordable markets for nurses is Portland, Oregon, where two-thirds (63.4%) of the rental market is available to nurses who spend 17.2% or less of their income on rent. The median rental available within that price range is 111 square feet smaller than the typical Portland rental, which is not a big difference compared to most rental markets.
