Rents Are Falling. So Why Are More Middle-Income Renters Falling Behind?

For nearly three years, asking rents across the country’s largest metros have been falling—and yet, renters are having more trouble paying them than ever before.

One in five working-age renters reported being late or unable to make their full rent payment at some point in 2025, according to a new analysis of the Urban Institute’s (UI) Well-Being and Basic Needs Survey (WBNS).

That was up from 16.5% in 2024 to 20% in 2025—and marked the first statistically significant year-over-year increase since the survey began tracking the measure in 2017.

“That means the jump is unlikely to be a fluke of who happened to answer the survey,” explains Hannah Jones, senior economist at Realtor.com®. “It's the first clear rise since the survey began tracking this measure in 2017, rather than the normal year-to-year fluctuation.”

But the timing is surprising. By the end of 2025, asking rents had been falling year over year for 37 straight months across the 50 largest metros, according to the latest Rent Report from Realtor.com.

And while lower-income renters remained the most likely to have trouble paying rent, it was middle-income renters who saw the sharpest year-over-year deterioration.

“The gap between lower- and middle-income renters narrowed in 2025, as payment problems among middle-income renters jumped 7.3 percentage points to 21.6%,” says Jones. “The strain reaching this group suggests the problem is no longer confined to the lowest-income households, pointing instead to a broader affordability challenge that has moved up the income ladder.”

Why falling rents haven't fixed affordability

It's a contradiction of basic logic: How can affordability be getting worse at higher income levels even as rents get cheaper? And part of the disconnect may be buried in what it means to say rents are “falling.”

While the median asking rent was almost 4% below its summer 2022 peak in August, it was still more than 15% higher than before the COVID-19 pandemic, according to data from Realtor.com.

And asking rents only capture units currently on the market—not what every existing renter is paying, says Jones.

“Falling asking rents don't necessarily translate immediately into lower payments, because renewals and existing leases can still reflect higher prices from earlier years,” she explains.

Renters had less room when the labor market weakened

But the bigger problem may be that renter incomes never caught up with the long run-up in housing costs.

Between 2001 and 2024, inflation-adjusted rents rose 30%, while renter incomes increased just 9%, according to Harvard’s Joint Center for Housing Studies.

Jones sees the two pressures working together, leaving renters with little room for error long before payment problems jumped last year.

“The more likely driver is the level of rent relative to income, which remains high even as rent growth slows,” she says. “Combined with stagnant real wages and softening employment, that leaves many renters with little room to absorb costs.”

But the wage data complicate the idea that falling pay itself pushed more renters over the edge in 2025.

Real wages rose 0.8% at the median in 2025, according to research from the Economic Policy Institute (EPI). Workers at the 40th percentile gained 1.9%, while those at the 60th percentile gained 1.3%.

But researchers at Harvard offer another explanation. They measured affordability using residual income—the money left over after housing to cover everything else.

And under that measure, 65.1% of working-age renter households were burdened in 2023, about 15 percentage points more than under the conventional standard that considers housing unaffordable when it consumes more than 30% of income.

Even more revealingly, 5.3 million renter households that looked affordable under that conventional measure still did not have enough money left after housing to cover estimated necessities.

While their analysis lags behind UI's, it can help us understand the cumulative impact that may finally be catching up to households. And in 2025, the bigger change came not from hourly wages, but from the labor market around them.

Employers added an average of just 49,000 jobs per month in 2025, down from 168,000 a month in 2024. And the number of people working part time because their hours had been cut or they couldn’t find full-time work rose by 980,000 over the year.

Americans were feeling that change, too: 42% of adults were concerned about finding or keeping a job in 2025, up from 37% a year earlier, according to an analysis from the Federal Reserve.

Years of cost burden are catching up

There's also the issue of rising household costs taking their toll.

More than 1 in 5 working-age renters (20.7%) reported being unable to pay their full heating or electricity bill at some point in 2025. That share was similar to 2023 and 2024, but higher than every year between 2019 and 2022.

Research from the Federal Reserve Bank of Philadelphia suggests the trade-offs go much further.

As of January 2026, 60% of renters had cut essential or discretionary spending over the previous year. More than one in four had reduced payments on other debts or skipped other monthly bills.

And again, the change wasn’t confined to households at the bottom.

Among renters earning between $60,000 and $120,000, 59.5% had cut spending—up 13.1 percentage points in just one year.

That creates a different picture of what it means for a household to be “keeping up” with rent, and it may also help explain why the middle-income increase is so striking.

Those households generally have more income than the lowest-income renters, but as Jones points out, they can also earn too much to qualify for assistance that might help after an income or expense shock.

Why aren’t homeowners getting hit as hard?

The theory raises an obvious counterpoint: If a softer labor market and higher living costs are pushing renters into trouble, why isn’t the same pressure catching up with homeowners?

To be clear, homeowners aren’t immune. But so far, their housing payments haven’t deteriorated in the same way.

The share of working-age homeowners reporting problems paying their mortgage remained roughly flat at 6% to 7% every year between 2019 and 2025, according to UI.

Part of the difference is built into the housing payment itself.

“Renters are more exposed to rising housing costs because their rent can increase at each lease renewal, while a fixed-rate mortgage payment stays the same,” says Jones.

But the bigger difference may be how much room each group has when something goes wrong.

“Homeowners also tend to have more savings, so they can absorb cost-of-living shocks better than renters with thinner cushions,” Jones explains. “Many homeowners bought or refinanced when mortgage rates were near historic lows in 2020 and 2021, which is one reason most homeowners have stayed current on payments.”

Separate research from the Philadelphia Fed helps quantify that gap.

Renters were 14.1 percentage points more likely than mortgaged homeowners to experience housing-payment trouble. More than half of that difference could be explained by factors including age, income, labor-market shocks, housing costs, and other expense shocks.

That suggests renters simply have less room to absorb it before it reaches the rent payment. And there are signs the same pattern emerges among homeowners when that cushion gets thinner.

Among borrowers in the lowest-income ZIP-code quartile, the rate of mortgage balances becoming at least 90 days delinquent rose from roughly 0.5% in 2021 to nearly 3% by late 2025, according to the New York Fed.

The increase was also larger in places where employment weakened most. Counties with the biggest increases in unemployment saw new mortgage delinquencies rise by nearly 0.6 percentage points, compared with about 0.2 points where unemployment was stable or falling.