Rising rents for single-family rental homes are stressing the budgets for many households. “There may not be as much room to raise rents going forward. We are starting to see affordability become an issue,” says Daren Blomquist, vice president with data firm RealtyTrac, which tracks foreclosures.

Demand for single-family rental homes is high, with very few empty homes. That’s one reason rents are rising quickly. But as rents rise faster than wages in many part of the country, many households already struggle to keep up. Though these households may have few other options, affordability may make it more difficult for institutional investors to raise rents.

High demand for single-family rentals

The nation’s inventory of single-family rental homes is nearly fully occupied. Just 3.1 percent of single-family homes not occupied by owners are currently vacant, according to the latest data from the U.S. Post Office, which keeps data on homes where mail is not being picked up or forwarded. “Everything we are hearing shows that vacancy rates are very low,” says Blomquist. “It’s still going to be a good rental market going forward.”

The median rent for a three-bedroom home rose 3 percent over the last year, according to the latest Fair Market Rent report from the U.S. Department of Housing and Urban Development, released in December 2015. Though this data includes apartments, the vast majority of the three-bedroom rental units in HUD’s sample are likely to be single-family rental houses, simply because most rental apartments have fewer bedrooms.

The rising rental cost of a single-family home is creating stress for tenants since the average income in the U.S. is not high enough to afford these houses. “On average, you are going to be spending 33 percent of your income to rent,” says Blomquist.

Of the 12 million renter households living in detached single-family homes, 5.4 million now pay more than 31 percent of their income towards rent, according to an analysis of Census data from the National Low-Income Housing Coalition (NLIHC). That’s 45 percent of these households. Nearly a quarter of households, or 24 percent, pay more than half of their income towards rent. These renters may struggle to keep up with rent increases.

Wages likely to grow

Wages grew just 2.2 percent over the year ending in the first quarter of 2015. That growth was above the rate of overall inflation, but not as fast the increase in the cost of housing, including the cost of renting a single-family house.

Many economists expect wages to continue to grow in 2016, including the leaders of the U.S. Federal Reserve. In December, the Fed raised its benchmark interest rate for the first time since the financial crisis, partly because of the improving labor market.

“There are some signs that wages are beginning to pick up,” says Blomquist.

Several metro areas are doing significantly better that the nationwide average increase of 2.2 percent. In Cook County, Ill., including the city of Chicago, average wages rose 20 percent over the year ending in the first quarter of 2015. Other top counties for wage growth include Harris County, Texas, where Houston is located, with 18 percent; Orange County, Calif., with 16 percent; and Miami-Dada County, Fla., with 10 percent.

“If you’re in one of those markets where they are doing very well with regard to jobs, you do have more of a ceiling to raise rents,” says Blomquist.