Rental Premiums Increase for Americans Seeking Extra Living Space

In the 100 largest metropolitan areas in the United States, over 25% of occupied residences are facing space limitations, with an excessive number of individuals residing in insufficient rooms. To exacerbate this issue, individuals seeking to alleviate space constraints by transitioning from a two-bedroom to a three-bedroom rental in these metropolitan areas should anticipate a nearly 30% increase in costs for this upgrade, as indicated by a LendingTree analysis.

Consequently, millions of Americans find themselves in cramped living conditions without access to affordable solutions, which poses difficulties both in the immediate term when accommodating friends and family during the holidays, and in the long term when considering family expansion or providing housing for adult children or elderly parents.

For millions of Americans residing in the largest metropolitan areas of the country, their homes are insufficiently spacious. In our analysis, we define a home as space-constrained if it accommodates more than 0.5 occupants per room. For instance, if four individuals live in a seven-room house, this results in 0.6 occupants per room, thereby fulfilling our criteria for being space-constrained.

Over 1 in 4 (27.7%) residences in the 100 largest metropolitan areas in the nation are classified as “space-constrained” according to LendingTree’s definition. In contrast, only an average of 3.3% of homes are considered overcrowded (defined as having more than 1 person per room) and 1.1% are categorized as severely overcrowded (with more than 1.5 people per room).

Space is tight in more than a quarter of U.S. homes:

Average % of space-constrained homes across top 100 metros	27.7%
Average % of overcrowded homes across top 100 metros	3.3%
Average % of severely overcrowded homes across top 100 metros	1.1%

Many Families Cramped in ‘Space-Constrained’ Homes

The report emphasizes homes that are limited in space. Although a significant portion of space-constrained homes exists in all of the largest metropolitan areas in our nation, the proportions differ considerably. In 18 out of the 100 metropolitan areas, at least one-third of the occupied residences have more than 0.5 occupants per room.

Among the 100 largest metropolitan areas in the nation, McAllen, Texas, stands out as the location with the highest prevalence of space-constrained homes. Approximately 50.1% of the 281,450 occupied residences in this South Texas metro area are classified as space-constrained, indicating more than 0.5 occupants per room. It is the sole metro area within the top 100 where at least half of the homes fall into this category.

Several other metropolitan areas are nearing the 50.0% mark, with Fresno, CA, ranking second at 47.2%. It is closely followed by Honolulu at 46.8%, Los Angeles at 46.6%, and Bakersfield, CA, at 46.4%. In total, seven out of the ten metropolitan areas with the highest proportions of space-constrained homes are located in California, including Stockton, Riverside, San Jose, and San Diego, in addition to the three previously mentioned California metros. New York and Miami complete the list of the top 10.

Texas and California lead the remaining top 20 cities as well. Four metropolitan areas in Texas (El Paso, Houston, Dallas, and San Antonio) and three in California (San Francisco, Oxnard, and Sacramento) each have at least 33.1% of homes classified as space-constrained. Conversely, at the bottom of the list, Pittsburgh (16.6%) and Cleveland (17.8%) exhibit the lowest percentages of space-constrained homes.

Although Texas and California lead the rankings, Ohio and New York occupy the lower end. Six out of the seven metropolitan areas with the smallest proportions of space-constrained homes are located in these two states, with Pittsburgh being the sole exception. Akron and Dayton accompany Cleveland from Ohio, while Syracuse, Rochester, and Buffalo represent New York.

Metros with the highest percentage of space-constrained homes:

Rank	Metro	Total occupied homes	Space-constrained homes	% of space-constrained homes
1	McAllen, Texas	281,450	140,886	50.1%
2	Fresno, CA	379,101	179,053	47.2%
3	Honolulu	338,627	158,539	46.8%
4	Los Angeles	4,583,939	2,136,482	46.6%
5	Bakersfield, CA	292,654	135,820	46.4%
6	Stockton, CA	252,693	113,187	44.8%
7	Riverside, CA	1,484,661	654,435	44.1%
8	San Jose, CA	693,483	305,001	44.0%
9	San Diego	1,185,092	481,885	40.7%
10	Miami	2,382,154	943,425	39.6%

Rental Premiums for Third Bedrooms Are Costly

The analysis encompassed all occupied residences, regardless of whether they were rented or owned. However, to assess the financial implications of upgrading to a larger home, we concentrated on rental expenses. The findings were not encouraging for individuals facing space limitations.

In the 100 largest metropolitan areas across the nation, we estimated that the average additional cost for a three-bedroom rental compared to a two-bedroom rental is $494 per month, translating to an average percentage increase of 29.0%.

The average rent hike associated with transitioning from a two-bedroom to a three-bedroom rental is considerably greater than the increases observed with other types of upgrades. The cost of moving from a one-bedroom to a two-bedroom rental would incur an extra $271 per month, while upgrading from three to four bedrooms would result in an additional $339 per month. The 29.0% increase for upgrading from two to three bedrooms is markedly higher than the 19.0% increase for transitioning from one to two bedrooms and the 15.4% increase for moving from three to four bedrooms.

The cost of renting a home with an extra bedroom:

Upgrade	Cost	% premium
From 1 to 2 bedrooms	$271	19.0%
From 2 to 3 bedrooms	$494	29.0%
From 3 to 4 bedrooms	$339	15.4%

The expense associated with upgrading from a two-bedroom to a three-bedroom rental significantly differs across the 100 largest metropolitan areas in the United States. In monetary terms, the highest cost for this upgrade is found in San Jose, California, where it amounts to an additional $1,125 per month. Only three other metropolitan areas exceed a premium of $900: Honolulu ($978), San Francisco ($924), and San Diego ($920). It is noteworthy that six out of the eight metropolitan areas with the highest dollar premiums are located in California.

On the other hand, the most affordable option for acquiring a third bedroom is in San Juan, Puerto Rico, with a monthly cost of $213, followed by Akron, Ohio ($243), and Jackson, MS ($254). When assessed by percentage, six metropolitan areas in the West share the highest premium for a third bedroom, each at 38.5%: Fresno, CA; Tucson, AZ; Honolulu; Colorado Springs, CO; Bakersfield, CA; and Stockton, California. Among the 20 metropolitan areas with the largest increases, only two—Virginia Beach, VA, and Lakeland, FL—are situated east of the Mississippi River.

On the opposite end, Philadelphia and Hartford, CT, exhibit the lowest estimated percentage premium at 19.1%. Albany, NY, and Atlanta are slightly higher, both at 19.2%, while Columbus, Ohio, follows closely at 19.4%. Overall, there are 25 metropolitan areas where transitioning from a two-bedroom to a three-bedroom rental would necessitate an estimated rent increase of no more than 25%.

In conclusion, the analysis has shown that while a larger home can provide additional space, it may also increase the strain on your finances. Prior to relocating, ensure that the calculations are favorable.

Metros with the highest/lowest estimated rental premiums (by percentage):

Rank	Metro	2-bedroom Fair Market Rent	3-bedroom Fair Market Rent	$ increase	% increase
1	Tucson, AZ	$1,405	$1,946	$541	38.5%
1	Colorado Springs, CO	$1,616	$2,238	$622	38.5%
1	Honolulu	$2,542	$3,520	$978	38.5%
1	Bakersfield, CA	$1,656	$2,293	$637	38.5%
1	Stockton, CA	$2,015	$2,790	$775	38.5%
1	Fresno, CA	$1,654	$2,290	$636	38.5%
7	Boise, ID	$1,528	$2,115	$587	38.4%
8	Virginia Beach, VA	$1,663	$2,292	$630	37.9%
9	Lakeland, FL	$1,608	$2,212	$604	37.6%
10	Albuquerque, NM	$1,384	$1,902	$518	37.4%

To read the full report, click here.