One in Five Renters Missed or Paid Late in 2025 as Mortgage Rates Lock Buyers Out of Ownership

Karla Guity pays $1,800 a month for a three-bedroom house with a yard in Shoreline, Wash., just north of Seattle — a deal she knows she cannot afford to walk away from. She and her husband want to buy in the area, but a monthly mortgage payment that could exceed $6,000 has made that impossible. So they stay, dependent, as she puts it, on the graces of their landlord.

We’re depending on the graces of the landlord.— Karla Guity, renter, Shoreline, Wash.

Guity's predicament is now the defining feature of the U.S. housing market. Elevated mortgage rates have stalled homebuying, pushing would-be buyers into rentals just as the supply of new apartments is drying up. The result: the typical national rent hit a three-year high of $1,932 in September, and one in five renter households either paid late or missed a payment in 2025 — the highest share recorded since researchers began tracking the measure in 2017, according to new research from the Urban Institute.

National rents rose 2.7 percent year-over-year in September, according to the Zillow Observed Rent Index, up from 2 percent a year earlier. Rental demand nationally was up nearly 20 percent over the same period, according to Zillow. The average homebuyer's monthly payment has reached $3,037, making renting the cheaper short-term option for millions — but one that is itself becoming less affordable by the month.

Elevated mortgage rates have pushed home shoppers straight into the arms of rentals.— Kara Ng, Senior Economist, Zillow

The pressure is sharpest in cities that had briefly offered renters relief. Rental demand is up 82.5 percent year-over-year in San Jose, 66.9 percent in San Francisco, 49.3 percent in Austin, 48.9 percent in Miami, and 43 percent in Phoenix, according to Zillow. San Francisco saw the largest rent increase of any major city, up 11.8 percent year-over-year — meaning an apartment that rented for $4,000 a month in September 2025 would cost roughly $4,472 by September 2026.

The reversal follows a brief window of relief. After the pandemic, rock-bottom interest rates encouraged a construction boom, particularly in Sun Belt cities. The flood of new supply — combined with generous landlord incentives to attract tenants — drove rents down sharply in cities including Austin and Phoenix. But rising interest rates starting in 2022 made large construction projects more expensive to finance, slowing the building frenzy. Tariffs, supply chain disruptions, and a labor shortage have pushed up material costs further, according to reporting by DNyuz. The wave of new apartments is receding, and fewer units are coming behind it.

Higher mortgage rates put pressure on the rental market not only from renters who are kind of stuck in there creating that demand. But you also have that making it more difficult for builders to finance new apartments, so you could see a drastic slowdown in supply on the multifamily side.— Molly Boesel, Senior Principal Economist, Cotality

Lance Swank, chief executive of the Sterling Group, a multifamily builder in Mishawaka, Ind., said his company ramped up construction when rates were low, then pulled back when it became clear the market was about to be flooded. He has also noticed that fewer lower-income renters are moving out of his company's properties — not because they are satisfied, but because they have nowhere affordable to go.

It's just a math equation for people. It's what they can afford.— Lance Swank, CEO, Sterling Group

The Urban Institute research, released this week, puts numbers to that math — and reveals that the strain is spreading up the income ladder. The share of middle-income tenants — those earning between 200 and 400 percent of the federal poverty line — who reported rent affordability challenges jumped from 14.3 percent in 2024 to 21.6 percent in 2025. Nearly 28 percent of low-income households reported difficulty paying rent. And 20.7 percent of renters said they could not pay the full amount of their heating and electricity bills in 2025.

Rental insecurity is creeping into these higher income levels, because it's going to have downward pressure on the people that are most vulnerable in the rental market.— Kathryn Reynolds, Principal Policy Associate, Urban Institute Research to Action Lab

Reynolds explained the cascading logic: middle-income renters, who normally have more buying power and choice, are now competing for units that would otherwise be available to lower-income households. 'You have to think of the housing market as one ecosystem,' she said. When one tier is squeezed, the pressure flows downward.

The Urban Institute study tracked working-age adult renters and homeowners from 2019 through 2025. Difficulty paying rent was higher in 2025 than in prior years across the Northeast, Midwest, and South. The West was the only region that did not see a significant increase, which researchers suggested may reflect relative affordability in some Sun Belt markets. The brief improvement in payment difficulties between 2020 and 2022 was attributed to federal COVID-19 stimulus payments and safety net expansions, which have since ended.

The rental market's renewed strength is also complicating the Federal Reserve's fight against inflation. Rent is a significant component of price indexes, and economists warn that the disinflationary pressure rents provided over the past two years is fading.

We're not in deceleration world anymore, probably not going to get a lot of disinflationary pressures from rents. If anything, the risks are that we may be going the other direction.— Jonathan Millar, Senior U.S. Economist, Barclays

On the policy front, the Urban Institute researchers warned that Trump administration efforts to expand work requirements and time limits for HUD housing assistance 'could reduce access to rental assistance for a portion of the 5 million renter households' that currently receive federal support. Reynolds called for states and localities to subsidize borrowing costs for developers and push for more construction, pointing to the ROAD to Housing law as a potential vehicle — though she cautioned that 'the devil's in the details.' In the meantime, she urged landlords to open dialogue with struggling tenants and be 'as flexible as possible, within the financial restraints of the property.'

There are pockets of relief. Rental demand is declining year-over-year in Louisville (-6.2 percent), Baltimore (-6.1 percent), Washington, D.C. (-5.6 percent), Cleveland (-5.5 percent), and Hartford (-2.9 percent), according to Zillow. But for most of the country, the arithmetic that traps Karla Guity in her Shoreline rental — too expensive to buy, too risky to leave — is becoming the new normal.

Why it matters — Rising rents, a frozen homebuying market, and shrinking federal assistance are combining to push housing insecurity into middle-income households for the first time, threatening to displace lower-income renters and complicate the Fed's inflation fight.

Reported by dnyuz.com, independent.co.uk, apollo.com, multifamilydive.com