Rental Market in the Midwest: Rising Costs Threaten Affordability

After years of escalating housing costs, 2024 brought some relief to renters in most of the United States, with rents remaining relatively stable or even declining. However, the Midwest remains an exception to this trend.

Causes of Rent Growth in the Midwest

The Midwest has experienced a robust economy and an influx of new residents seeking lower living costs. However, this has exacerbated a housing shortage due to limited residential construction compared to other regions. As a result, rents continue to increase in major Midwestern metro areas, with cities like Cincinnati, St. Louis, and Kansas City experiencing some of the highest growth rates in the country.

Supply and Demand Imbalance

A lack of supply, combined with the increasing number of renters delaying homeownership due to high costs, has kept rents elevated in the Midwest, according to Matt Vance of CBRE. "There's not as much competition from new landlords, since there aren't many new properties available," he explains. "Plus, renters are staying in place for longer periods."

Cincinnati: A Case Study

Few areas in the Midwest have seen rents rise as sharply as Cincinnati. The median rent in November was $1,365, up 2.6% from the previous year. Maggie Shreve, a Cincinnati native, has experienced a significant increase in her rent. Since relocating from Chicago, her rent for a two-bedroom apartment has jumped over 20%, straining her budget.

Affordability Concerns

Rising rents threaten to push living costs out of reach in the Midwest, one of the few remaining affordable regions in the country. While the Midwest still offers slightly better affordability than other regions, minimum wage earners in cities like St. Louis and Kansas City still face challenges in meeting rental costs while staying within affordability guidelines.

Outlook

With limited housing starts in the Midwest, rent growth is unlikely to slow down in the near future. However, minimum wage increases in many metro areas may improve affordability for some households.

"In some markets, incomes do keep up better with rents," notes Danielle Hale, chief economist at Realtor.com. "But affordability remains a concern for many households across the spectrum."