Indicators Of Apartment Rental Growth
Usually, when you think of rent growth, you automatically think that income and job growth are also on the rise. But if this is true, to what degree? MPF Research set out to answer this question and looked at the relationship between income, employment and apartment rent in many of the top U.S. metro states over the past seven years. What they found is that even though there is a general relationship between them all, it’s not really as consistent as you might think it is.
But they did have one huge takeaway: rent growth is correlated to income growth in markets on the extremes. But that relationship was weaker in most metro cities, which then suggests that income growth isn’t a very reliable predictor of rent growth as first thought.
The study found many counter-intuitive results in a number of big markets, such as New York and Miami. The Big Apple was one of the nation’s best cities for income gains, but the worst for apartment rent growth. Miami was also ranked pretty high for rent growth despite the fact there were no real improvements in the city’s income levels.
What the study suggests is that the relationship between income and rent isn’t consistent to bank on in the future. There is no one-size-fits all forecast model for rent growth in metro areas and each metro needs to be looked at on its own level. But it’s good to know that the study wasn’t supposed to measure apartment affordability. And comparing incomes and jobs with rents isn’t the same, either. Renters are usually younger, so much data on jobs and income is different than apartment data, which is probably why income and rent growth aren’t as aligned as one would expect.
The West region had a bit of both on the high end and the low end when it come to rent growth and income growth. However, the South region had many of the best metro-level performances, but these huge income growths didn’t necessarily translate to big rent growth. The Northeast region had mild-to-moderate changes in rents and jobs, while the Midwest region was fairly consistent across all markets.