The gap between incomes and rents across different boroughs provides one of the most telling metrics in New York City’s housing crisis. In many neighborhoods, particularly those in the throes of gentrification, rents have skyrocketed while wages for existing residents have remained essentially flat. The result is a situation where even moderate-income families are increasingly rent-burdened. To illustrate this, the Housing Lab calculated how much of a raise would be needed for residents of each borough to avoid rent burden.

In Brooklyn, for example, the average resident requires a nearly 40% increase in income to avoid being rent-burdened; in other words, the borough’s average rent vastly exceeds what many workers in local industries can afford. In Queens, residents would need a 30% raise. In contrast, Manhattan—where rents are highest—has more residents at the upper end of the income scale, meaning fewer individuals are technically rent-burdened, but the average income needed to comfortably live there is significantly higher.

This discrepancy between income and rent underscores the growing inequality in the city; a pattern that is also true across the country. Without significant wage growth or more substantial government intervention in rent stabilization and affordable housing development (and or loosen regulations and requirements that bring down construction costs), a large portion of NYC’s population will continue to struggle with housing costs. Looking deeper, however, this is not an issue unique to NYC, and is largely true of the situation across the country over the last 40 years based on 3 key metrics.

A Troubling Trend

One of the most profound factors contributing to today’s housing affordability crisis is the disconnect between wage growth, rent increases, and inflation over the past four decades. Beginning in the 1980s, wages for many workers in the United States have stagnated, while both rents and overall living costs—driven by inflation— have continued to rise at a much faster pace. This delamination has placed significant pressure on renters, especially low- and moderate-income households, and has become a key argument for the need for affordable housing reform.

Stagnation of Wages

Beginning in the late 1970s and continuing through the 1980s, wages for most American workers began to stagnate, despite increases in worker productivity. Adjusted for inflation, real wages (the buying power of workers’ incomes) have remained largely flat.

This wage stagnation is especially pronounced for lower-wage earners, who have seen little to no real income growth over the past 40 years. As manufacturing jobs declined— between 1970 and 2014, the number of manufacturing jobs in NYC declined by nearly 80% — and the economy shifted toward a service-based structure, many workers faced reduced job security, fewer benefits, and slower wage increases. Wealth inequality also increased during this time, with the wealthiest households reaping the benefits of economic growth while low- and middle-income earners fell behind. The lack of meaningful wage growth has severely limited the ability of many families to keep up with rising housing costs.

Rising Rents

While wages stagnated, rents have surged. According to Harvard’s Joint Center for Housing Studies, between 1980 and 2020, median rents in the U.S. increased by 74%, far outpacing wage growth​. This disconnect is particularly severe in high-demand cities like New York, San Francisco, and Los Angeles, where real estate markets have become dominated by high-end developments, speculative investments, and gentrification. In these areas, renters face the double burden of rising rents and stagnant incomes, making housing unaffordable for a growing segment of the population.

For example, in New York City, rent increases have been driven by both local and global demand. The city’s robust financial sector and status as a global real estate hub have pushed rents to unprecedented levels. Many low- and moderate-income households have been priced out of neighborhoods they’ve lived in for generations, leading to displacement and a severe affordable housing shortage.

Inflation: The Background Pressure

Inflation has also played a role in widening the gap between wages and rent costs, although its effects have been somewhat more erratic. Inflation in the U.S. has fluctuated over the past four decades, with significant spikes in the 1970s and early 1980s, a period of relatively low inflation in the 1990s and 2000s, and then a resurgence in recent years, particularly after the COVID-19 pandemic. The costs of goods and services, including utilities, food, transportation, and medical care, have all risen due to inflation, further straining the budgets of renters.

While inflation affects all sectors of the economy, its impact on housing is unique because housing costs tend to rise faster than overall inflation (the 74% noted earlier). Housing has become one of the primary contributors to inflation in many cities, largely due to supply shortages, increased demand, and rising land costs. Even when general inflation is moderate, housing inflation—particularly rent inflation—continues to outpace other categories.

The Consequences for Renters

The combined effects of wage stagnation, rising rents, and inflation have created a housing affordability crisis that is especially acute for renters. Renters now spend a larger portion of their income on housing than at any time in recent history. For example, in 2020, more than 25% of renters spent over half of their income on rent, placing them in a state of severe rent burden. This leaves less income for other essentials like healthcare, education, and savings, and increases the likelihood of housing insecurity or eviction.

For low-income renters, the situation is even more dire. Many rely on government assistance programs like Section 8 vouchers, but these programs are underfunded and can only serve a fraction of those in need. As rents continue to rise, the purchasing power of these subsidies decreases, further straining the housing safety net.

A Case for Reform

These trends make it clear that reforms are urgently needed. We should increase the supply of affordable housing, implement stronger rent control policies, and expand housing assistance programs. For decades, housing has been treated primarily as a commodity, with profit-driven real estate development exacerbating the affordability gap. To address the crisis, policymakers must take steps to regulate the housing market, provide more robust subsidies for renters and/or developers, and ensure that wage growth keeps pace with the cost of living.

Addressing these structural issues is critical to ensuring that all Americans, regardless of income, can afford stable, secure housing. The data from the past 40 years highlights the urgency of these reforms, as the gap between wages and housing costs has only grown wider with time.

April, 2023

RESEARCH TEAM

Galia Solomonoff, Director

Eddie Palka, Adjunct Associate Research Scholar, ‘18 M.Arch

Kavyaa Rizal, Graduate Research Assistant, ‘23 MSUP

Jamon Mok, Graduate Research Assistant, ‘23 MArch

Lula Chou, Graduate Research Assistant, '24 MSRED, MArch