February 20, 2024
There have been numerous stories in recent months about how housing is unaffordable for millions of people. This is certainly true. An inadequate supply of affordable housing is one of the major problems facing the country, and especially young people and minorities.
However, data from the Bureau of Labor Statistics indicate that rent on average has become more affordable for people now than it had been when Donald Trump was in the White House. Wage growth has actually exceeded the rate of rental inflation since President Biden took office.
Here’s the picture for the two presidents.
Source: Bureau of Labor Statistics and author’s calculations.
The chart shows wage growth for production and non-supervisory workers. This group comprises roughly 80 percent of employees. It excludes managers and highly paid professionals, so it is not affected by rapid wage growth at the top end of the wage distribution. It closely tracks the median wage.
For Trump, I took the period from January of 2017, when he took office, until February of 2020, the last month before the pandemic began skewing the data. For Biden, I took the period from February 2020 to January 2024. This effectively compares current wages to their pre-pandemic level.
As can be seen, nominal wages grew by 10.1 percent under Trump. However, average rents increased 11.7 percent, meaning workers’ wages fell behind rental inflation under Trump.
Rental inflation jumped sharply during the pandemic, as people working from home needed more room. They also had the money saved from commuting-related expenses to pay for it. Rents rose by 21.6 percent under Biden. However, the average wage increased by 23.5 percent, almost 2.0 full percentage points more than rent.
Averages don’t tell us everything, there are many areas where rents rose more rapidly than the national average. And not all workers saw wage increases that kept pace with the average, although we do know that wage increases were more rapid for those at the bottom end of the distribution. This means that rent should be more affordable today for the typical worker than was the case when Donald Trump was in the White House.
This doesn’t mean that housing is not a serious problem. Tens of millions of people are inadequately housed, and hundreds of thousands are homeless altogether, living on streets and in shelters. In the short term measures like rent control, converting vacant office space to residential units, and restrictions on vacation rentals can help. In the longer term we need to relax zoning restrictions and take other measures to build more housing.
But the bottom line here is clear. It is hard to tell a story based on the data where affordable housing is a greater problem today than before President Biden took office. For some reason the media have chosen to highlight the problem today to a much greater extent than before the pandemic.
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