As the average household income level of a metro rises, we using see asking apartment rents grow alongside it. We rent levels fall out of alignment with the growth of household incomes, affordability issues begins to emerge. Moreover, the affordability issue continues to be exacerbated by discrepancies in supply and demand conditions.
Let’s examine the relationship between small asset apartment asking rents and household income across the nation.
Metros with the highest average household income levels, including Technology Centers and the large Gateway markets, have the highest average unit rents nationally. Additionally, the slower rate of inventory growth in the small property market is having an increasing impact on affordability due to rent growth outpacing household income growth.
Metro Rents are Highly Correlated with Household Income
While examining household income trends by renter groups can help small building operators identify emerging demand segments, income dynamics at the metro level can provide additional insights on overall market strength.
The latest data update from the Census Bureau for year-end 2015 for the Top 50 US metros (see Box 1 at the bottom of the post for definitions) shows that average household incomes generally decline with market segment size.
For example, in 2015, small building renters in Gateway cities had an average household income of about $57,000, while the Top 20 metros taken together had a lower average income of $53,000, and the Top 50 came in at around $48,000.
New research from Chandan Economics examines the correlation between income and rent rates across the U.S. Read the full story on ALEX Chatter.