The good news for renters is that landlords today are less likely to raise the rent by a lot. The bad news is, rents are still high and unlikely to fall anytime soon. As with all real estate, though, rents are local, and some unexpected markets are heating up, while some hot ones are cooling off.
Austin, Texas, for example, is one of the most affordable rental markets in the nation, even though home prices there are rising fast. The reason is that job growth and wage growth are strong in the new tech hub, and rents are still comparatively low. It would take just 23 percent of the average resident’s monthly household income to pay the average monthly rent, according to a new study by AppFolio, an apartment management company which commissioned data from Axiometrics, a real estate research firm.
The most affordable city for apartment renters, according to the study, is Las Vegas. That is not surprising, given that the city was the epicenter of the foreclosure crisis, and buying a home there is still quite affordable. More homebuyers means less rental demand and therefore lower rent prices. Rounding out the top five cheapest markets are Indianapolis, Phoenix and Atlanta.
“Supply is finally catching up with demand in many markets, so rent growth is starting to slow. It took a few years extra after the recession to get to this point because during the recession construction effectively stopped, while renter demand was still growing,” said Nathaniel Kunes, vice-president of product development at AppFolio.
On the opposite end of the spectrum, New York City and Miami are the most “rent-burdened” cities in the nation. Residents there pay more than half of their monthly incomes on housing alone. Boston, Los Angeles and San Francisco round out the worst market’s for rental affordability.
The toughest markets for renters are not exactly a surprise, but there are some unexpected markets where rents are heating up fast and renters are becoming increasingly stretched. These markets are in the Midwest, where demand is rising and supply is relatively stagnant.
“The Midwest is hot right now because it is one of the few markets where rent prices had been dropping. This was due to job loss and oversupply for the last few years in this market,” said Kunes. “Now people are migrating back into the Midwest and jobs are coming back. Rents are still quite affordable in the Midwest compared to the rest of the country.”
But they are rising. Minneapolis-St. Paul, for example, is seeing 4 percent rent growth, which is twice the growth of Miami rents. Indianapolis is also seeing rents rise faster than Boston. New York City may one of the least affordable markets, but rents are actually falling there, just under one percent annually.