Gen Z is getting a break on rent
Rents are so damn high. But the situation is somewhat better than last year, and it’s good news for one particular group: recent college graduates.
The typical recent college grad would need to spend almost 21% of their income to rent a median-priced, two-bedroom apartment, equal to $1,725 a month—and that’s assuming they’re splitting the rent with a roommate. But that’s down from close to 23% last year, according to a recent Redfin analysis of apartment asking rents through July 2024 and estimated 2024 salaries for employed college graduates ages 22 to 29, so a lot of Gen Zers and some millennials.
For those wanting to live alone, though, the typical grad would need to spend close to 36% of their income to rent a $1,495 median-priced studio or one-bedroom apartment, still down from 39% last year.
“Rents are falling in many parts of the country at the same time that wages are rising,” Redfin senior economist Sheharyar Bokhari said in the analysis. “That’s why college grads are less likely to be rent burdened than they were last year.”
Of course, affordability varies depending on where you live and work. In San Jose, one of the pricier metropolitan areas in the country, a recent college grad would need to spend almost 28% of their income to rent a typical, two-bedroom apartment (again, assuming they’re living with a roommate and divvying up the rent). That’s just below the rent-burdened threshold, which is defined as spending more than 30% of your earnings on housing. And only a year ago, that same college grad living in the city would need to spend about 31% of their money on rent.
There are a couple factors at play. First, according to Redfin, the Bay Area has the highest salaries for college grads, which isn’t surprising given it’s the world’s technological epicenter. Per the analysis, the typical recent college grad in San Jose makes roughly $108,500, and the median asking rent for a two-bedroom home in San Jose fell close to 2% from a year earlier. Either way, it doesn’t mean all is well in the Northern California region, or the West for that matter.
“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,” Redfin senior economist Bokhari said. “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.”
In Austin, on the other hand, the typical recent college grad would need to spend about 28% of their income to rent a median-priced studio or one-bedroom apartment, down from roughly 35% last year. It was the only metropolitan area to go from being considered unaffordable to affordable for recent college graduates who want to live alone. Asking rents in Austin for one-bedroom apartments and studios plummeted close to 13% (one of the greatest falls nationwide) compared with a year before in the three months prior to August. Austin happens to be the best place for renters overall, according to Realtor.com.
“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,” Redfin chief economist Daryl Fairweather said in the analysis. “But college grads in places like New York, Los Angeles, and Boston may have tougher decisions to make.”
She continued: “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.”
Even with roommates, recent college graduates in Los Angeles, New York, San Diego, Riverside, Boston, and Miami are considered rent burdened, meaning they’re spending more than 30% of their income on housing, per Redfin. And still, in each metropolitan area, it’s an improvement from last year. Rents across the country are softening, and landlords are sweetening deals in the wake of skyrocketing prices throughout the pandemic.
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