In 2025, the average renter in the U.S. hands over the equivalent of almost two weeks' worth of income to their landlord and oftentimes even more. The median home rent across all municipalities in the country is roughly $2,100 a month, according to Zillow. With a median household after-tax income of roughly $5,000 a month, the typical American is shelling out just about 40% of their take-home pay on housing, well above the recommended “30% of gross monthly income” rule of thumb.

Why High Rents Matter

For young adults, that high rent math often means one thing: stay put. Many are delaying independence, reducing costs by having roommates, or moving back in with family. What looks like a lifestyle choice is actually an economic constraint, and it is reshaping the rental and ownership markets as well as society.

The American Housing Shortage

A core reason for the high rents is a structural American housing crunch. San Francisco’s real estate market is a cautionary tale. The city’s tech-fueled AI hiring spree has collided with decades of underbuilding, sending rents and home prices spiraling. New York tells a similar story: since 2010, jobs have grown 22%, but housing stock has grown only 4%. That’s quite the gap. In both cities, scarcity is policy as much as economics.

A similar picture, but for different reasons, is appearing in the Sunbelt, Southeast, and Mountain West. Cities like Houston, Orlando, and Charlotte are magnets for migration and job growth. But these fast-growing metros cannot build quickly enough to meet demand brought by arriving U-Hauls, which keeps upward pressure on rents while setting the table for stronger homeownership demand later.

Generational Drag

Household formation is a key driver of long-term housing demand, and Millennials and Gen Z are pushing that milestone further out like it’s a student loan payment. With affordability stretched, many are skipping the traditional starter home phase. That delays mortgage origination, retail spending on home goods, and even broader economic multipliers tied to housing. When the shift eventually happens, it will be a release of pent-up demand.

The Two-Stage Shortage

Right now, the housing shortage props up rents and sidelines would-be buyers. Tomorrow, it sets the stage for a demand surge when today’s delayed households eventually seek ownership. That means investors looking at this from a bird’s-eye view will see a two-stage positive effect on housing: rental income strength in the near term and pent-up ownership demand further out.

Bottom Line

The housing shortage is pushing rents higher now and creating pent-up ownership demand later. ETFs like IYR, VNQ, SCHH, and HOMZ let investors benefit from today’s rental strength while positioning for the long-term housing demand release.

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November 28, 2025