A new report by rental industry news network, Apartment List was recently released for its 2019 ranking of the country’s most affordable rental markets. Looking at the largest 100 cities in the US, the report aims to target the spectrum of rental rates that span from top market prices to more affordable options. The report based its findings on the average rental price in each city as collected from last quarter of 2018. Taking this information and weighing it against information from the Bureau of Labor Statistics on median annual income, each location’s rent vs income rates were determined.
To understand true affordability in rental markets across the country, guidelines set by the U.S. Department Housing and Urban Development were used that categorize rents costing tenants more than 30% of their annual income as cost-burdening and harder to sustain. Understanding the areas where high salaries are necessary to live and rent along with those that are easier to afford, the 2019 report reflects much from that of last year’s results. With the factors driving rent costs remaining consistent over the last two years, renters are still burdened and benefiting from the same locations of last year.
The locations with the highest income to rent gap were those where home ownership is harder to obtain and where property is limited. Locations such as New York City, Boston, Los Angeles and San Francisco were recorded to have rents that would cost the median income tenants up to 5% more of overall funds than the recommended 30%. In total, 24 of the 100 cities evaluated surpassed the recommended threshold for how much income to allocate to rent.
On the other side of the spectrum, areas that are categorized as up and coming with less stringency on land and property had rents that were more affordable. Locations throughout the country including Phoenix, Seattle, Sacramento and San Antonio had rental rates that were well under the recommended 30%, with some falling as low as 17%. Some states, like Texas, even had all of its cities evaluated falling in the affordable category. Underscoring the well-known value in the state were cities like San Antonio who ranked amongst the lowest priced rental markets in the lists top 100 cities. “The rental cost evaluation of Texas’ major metro areas like Houston, San Antonio and even Dallas, reflects the levels of renter populations vs availability in the area that is continuing to grow.” shares CEO and founder Marcus Hiles of the leading property development firm in the state, Western Rim.
With wider spread popularity of renting over home-buying caused in part from the unpredictability of the housing industry and younger generations adopting home ownership later in life, there is a growing need for affordable rental properties. Targeting areas highlighted by the report as affordable such as states like Texas, properties developers are capitalizing on an opportunity that benefits both the investor and end-user.
“We will continue to see rental rates skyrocket in areas that have sustained top tier value as land availability lessens and as popularity continues to rise. At the same time with renters entering the market and staying in it longer, the need for affordable rental options will remain.” shares Marcus Hiles, who has established over 25,000 rental units in the state. This trend is not likely to change, as the key factors pushing younger generations into renting continue, this short-term, flexible solution is one that will be continuously adopted widely throughout the US.