Housing Used to Be Affordable
In 1960, the median renter household spent less than 20% of their income on housing. Today, it is over 30%. Half of all renters are now "cost burdened," spending more than the recommended 30% threshold. Here is how we got here.
Being "cost burdened" means spending more than 30% of income on housing. In 1960, only about a quarter of renters crossed that threshold. Today, half do. The median renter in 1960 spent less than 20% of their income on rent. By 2022, the median renter spent 31%.
The share of cost-burdened renters doubled
According to the Harvard Joint Center for Housing Studies, the share of renters spending more than 30% of income on housing has grown steadily for six decades.
The situation is even worse for low-income households. Among renters in the bottom fifth of incomes, 83% were cost burdened in 2022, with 65% facing severe burdens (spending more than half their income on rent). For renters living in poverty, the average household spent 78% of income on housing in 2022, up from 54% in 1960.
Home prices versus income
The price-to-income ratio shows how many years of household income it takes to buy a median-priced home. In a "healthy" market, this ratio is around 2.6. It has not been at that level nationally since the late 1990s.
| Year | Median Home Price | Median Income | Price-to-Income |
|---|---|---|---|
| 1960 | $11,900 | $5,600 | 2.1x |
| 1980 | $47,200 | $17,700 | 2.7x |
| 2000 | $119,600 | $42,000 | 2.8x |
| 2019 | $240,500 | $68,700 | 3.5x |
| 2024 | $412,500 | $80,000 | 5.2x |
In inflation-adjusted terms, the median home that cost $104,619 in 1960 (in 2020 dollars) now costs over $400,000. That is roughly a 280% real increase. Meanwhile, real median household income has increased only about 40% over the same period.
The gap is accelerating. From 1985 to 2024, U.S. median household income rose about 255%, while median house prices surged more than 415%. The divergence has been especially sharp since 2020.
A decade-by-decade breakdown
Housing was relatively affordable. About 24% of renters were cost burdened, and severe burdens were rare (under 14%). The median renter spent less than a fifth of income on housing.
The price-to-income ratio for homebuyers was around 2.1, meaning a typical home cost just over two years of household income.
Recession and inflation created the first major gap in affordability. Income inequality increased, inflation outpaced wage growth, and multifamily construction slowed.
By 1980, the cost burden rate hit 35%, with more than half of those renters experiencing severe burdens.
The economic boom gave renter incomes a boost, but rents continued rising. Cost burden rates hovered around 38% through the 1990s.
Interest rates peaked at over 18% in 1981, making homeownership temporarily out of reach for many, but rates fell steadily through the decade.
The housing bubble inflated prices dramatically. The price-to-income ratio exceeded 7x at the 2006 peak. Subprime lending let more people buy, but many could not sustain the payments.
After the 2008 crash, foreclosed homeowners flooded the rental market, pushing rents up while construction stalled. By 2011, cost burdens peaked at 51%.
A slow recovery. Incomes gradually improved and cost burdens ticked down slightly, but never returned to pre-2000 levels. The share of cost-burdened renters stayed above 45%.
Low interest rates helped homebuyers, but home prices in coastal cities and job centers grew faster than incomes.
The pandemic accelerated the crisis. Remote work increased housing demand in new areas. Supply chain disruptions slowed construction. Prices surged.
By 2022, 50% of renters were cost burdened again, a record high. Homelessness counts reached their highest levels ever recorded.
Why this happened
Several forces converged to make housing less affordable:
We stopped building enough
Into the 1960s, building was lightly regulated almost everywhere. In Manhattan, 13,000 new housing units were permitted in 1960 alone, nearly two-thirds of what the entire decade of the 1990s would see. Zoning restrictions, NIMBYism, and regulatory barriers have constrained new construction in high-demand areas, pushing prices up.
Income growth stalled for most workers
While GDP grew substantially, the gains went disproportionately to higher earners. Median household income, adjusted for inflation, has grown only modestly since the 1970s, while housing costs have outpaced inflation consistently.
Housing became an investment asset
Investors and corporations have increasingly purchased single-family homes and converted them to rentals, reducing supply for would-be buyers and putting upward pressure on both home prices and rents.
Interest rates masked the problem temporarily
From 1981 to 2021, falling interest rates made monthly payments more affordable even as prices rose. When rates jumped from 3% to 7% in 2022-2023, the affordability crisis became impossible to ignore.
The result: Households earning $75,000 today, a bracket that includes teachers, nurses, and skilled tradespeople, can only afford 21% of listings, down from 49% in March 2019 according to the National Association of Realtors.
What this means for you
If you are trying to figure out what you can actually afford, these trends matter. The old rules of thumb were created when housing took a smaller bite out of the typical paycheck.
Banks still use gross income to qualify borrowers, which can result in approval for a payment that leaves you stretched thin. That is why we built our calculator to use take-home pay and show you what is actually left for living after housing costs.
The 30% guideline comes from a different era. In 1969, Senator Edward Brooke proposed capping public housing rent at 25% of income. Congress raised it to 30% in 1981. That figure was never meant to be universal financial advice, but it has become the default benchmark.
Today, with housing consuming a larger share of income than at any point in modern history, the question is not just "can I afford this?" but "what will be left after I pay for it?"
Harvard Joint Center for Housing Studies, "Rental Housing Unaffordability: How Did We Get Here?" (2024)
Harvard Joint Center for Housing Studies, "The State of the Nation's Housing 2025"
U.S. Census Bureau, "Historical Census of Housing Tables: Home Values"
Federal Reserve Bank of St. Louis, Median Sales Price of Houses Sold (MSPUS) and Real Median Household Income (MEHOINUSA672N)
HUD, "Rental Burdens: Rethinking Affordability Measures"
The Zebra, "History of U.S. Homeownership" (Census Bureau analysis)
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