High Income Earners Love Rentals

There was an excellent report released last week from the Joint Center for Housing Studies of Harvard University, titled America’s Rental Housing 2020. With too many highlights to cover in one post, we’ve taken out the main takeaways so you can get back to your day:

  1. Despite slowing demand and the continued strength of new construction, rental markets remain extremely tight.
  2. Nearly all new multifamily units are built as rentals, with a growing share in larger buildings intended for the high end of the market.
  3. Rents have been on a remarkable uptrend. Between 2012 and 2017, the number of units renting for $1,000 or more in real terms shot up by 5.0 million, while the number of low-cost units renting for under $600 fell by 3.1 million.
  4. Strong operating performance has propelled nominal apartment prices to new heights, up 150 percent between 2010 and the third quarter of 2019.
  5. After paying rent each month, lowest-income households have little money left over for other necessities. The median renter earning less than $15,000 in 2018 had only $410 left each month for food, transportation, healthcare, and other basic needs.

And, perhaps most interesting for investors involved in Class A and high-income markets: “The number of high-income renters continued to climb, increasing by 545,000 in 2016–2018 alone. In fact, households with real incomes of at least $75,000 accounted for over three-quarters of the growth in renters (3.2 million) from 2010 to 2018, while the number earning less than $30,000 fell by nearly 1 million.”

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The coverage of this report was widespread and will continue into the week. Kristopher Brooks of CBS News noted that in 2010, average renters were single with high school education, making under $30,000 a year. Citing the Harvard report, Brooks notes that by 2018, this profile shifted to college-educated married couples.

Alcynna Lloyd from Housing Wire reports on a separate study from Zumper showing that rents nationwide in February continued to climb, rising 0.3% for 1-bedroom and 0.7% for 2-bedroom units month-over-month.

Sources: Harvard University Joint Center for Housing Studies, 2020; Stessa.com, 2/12/20; CBSnews.com, 2/4/20;