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Rents Are Falling in New York and Silicon Valley

Rents are the highest they’ve ever been, but here’s some good news for apartment-dwellers: Yearly increases have slowed to their lowest level in five years.

The median rent payment in the U.S. was $1,408 per month as of March, according to Zillow. That’s up 0.7% from a year earlier, marking the slowest rate of appreciation since November 2012.

In some cities, like Chicago and Houston, rents actually fell over the prior 12 months. And in the Bay Area of California—the most expensive rental market in the country—rapid rent hikes have stalled. Rents fell 1.1% in San Jose over last year, after rising nearly 9% a year earlier. In San Francisco, rents had risen almost 10% from March 2015 to March 2016, but then flatlined. As of last month, the median rent in San Francisco was $3,352. Rents fell 1.3% in New York over the prior 12 months with a median of $2,386.

Landlords are less likely to pass on big rent hikes to their tenants, partly because developers have been rapidly building multifamily housing over the last few years.

“The slowdown in rental appreciating is mainly due to new construction finally meeting demand, and even outpacing demand in some areas,” Zillow’s chief economist Svenja Gudell said in a press release.

That said, there’s still what some economists may call an “affordability crisis.” There’s an old rule of thumb that says you probably shouldn’t spend more than 30% of your income on housing each month. But in many major metro areas, it now takes well over 30% of median income to pay for housing. In some of these areas, it would make more sense to buy a house because rent now exceeds the average monthly mortgage payment, but renters are having trouble saving enough money for down payments, Gudell said.

A separate Zillow report released last month showed predominantly black and Hispanic communities are hit most severely by this problem, with tenants in these neighborhoods now spending almost half of their monthly income on rent.