A typology of U.S. metropolises by rent burden and its major drivers.

Abstract

Scholarly work on rent burden, a rather scantily discussed topic within the broader realm of declining housing affordability, still lacks a firm theory. This article seeks to address this gap by developing a typology of U.S. metropolises which centers on their rent burden status and serves as an initial step toward theory building. We employ principal component and cluster analyses to identify seven distinct types of metropolises and their potential drivers of rent burden. An examination of these seven types suggests that rent burden has spatial randomness to it, since some metropolises in the seven types do not confine to specific geographies. Metropolises with pronounced specializations in education/medicine, information, and arts, recreation, and entertainment exhibit higher rent burden, whereas older Rust Belt metropolises have lower burden. Interestingly, emerging new-economy metropolises exhibit lower rent burden as well, likely reflecting the benefits of newer housing and a diverse economic base. Finally, rent burden, besides being an outcome of the housing demand/supply mismatch, is also a manifestation of income potentials that are affected in complex ways by local labor markets and regional economic specializations.