Rents are slowly getting more expensive across the nation, but a new report finds that they’re rising even faster for the lowest-priced properties.
Research shows that over the past five years, there’s been a steady decline in rent affordability nationwide. That means more Americans are putting more of their income toward housing. Aaron Terrazas is a senior economist with Zillow, who authored the study.
“When you look at the share of the median household income that goes to rent, that’s kind of the very middle of the income distribution, that’s been simply rising over the past half decade,” Terrazas said.
But Terrazas wanted to go beyond the median data, looking at how rising rents are affecting people at different income levels. He found that nationwide, the uptick in rent prices has been the strongest in the bottom third of the market – in other words, what's considered "affordable housing" is getting more expensive – and fast. Terrazas says that can be attributed to a combination of factors.
“It’s a combination of influx of demand,” Terrazas said. “Renters who used to kind of be able to afford higher-priced units are increasingly priced out of those higher market segments, and so that’s pushing up demand at the bottom of the market. More people are renting than ever before, as well.”
Rent appreciation for the most expensive properties varied, but in many cities it has remained flat or even decreased. Still, in all of the markets Terrazas analyzed, top-tier renters are spending less than 30 percent of their income on housing. While Terraza's study didn’t include data for Austin, local expert Eldon Rude, a principal at 360 Real Estate Analytics, says he thinks some of the rent increases in Austin can be attributed to the growing demand for housing.
“From July  to July , we’ve created almost 164,000 new jobs in the region,” Rude said. “That’s over 40,000 a year, and with a low unemployment rate, that’s a lot of people moving to Austin.”
In turn, neighborhoods that were once affordable are rapidly appreciating in value.
“A lot of those properties have been purchased over the last several years and refurbished, and so when the new owners come in, and they refurbish those projects, they generally increase the rents, and sometimes the percent increase can be fairly significant,” Rude said.
But Rude said, in Austin, rent increases are not unique to lower-end of the market. He said all types of apartments are seeing significant increases.