October 8, 2014

Zillow Guest Post: Are Bigger Cities Pricing Out Renters?

By Jennifer Riner of Zillow

Renters in major metropolitan regions are increasingly devoting larger portions of their net incomes toward housing.

Cities like New York and San Francisco are especially susceptible to astronomical rent rates. What may come as a bigger surprise, however, is how much rent prices have deviated in some cities throughout the past few decades. Philadelphia renters spend 28.2 percent of their monthly income on rent, which is 55.5 percent more than the historical average. In Washington, D.C., the deviation is even higher - just shy of 70 percent. While renters in Los Angeles, Miami and San Francisco pay the highest portion of their respective average incomes nationwide, the other cities aren’t far behind. 

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 With an influx of high lease prices in so many cities, where are the best places for renters - particularly low- and moderate-income families who must balance the cost of rent with other key decisions, such as finding good schools?  Most major cities have high average rents due to the competitiveness that stems from a significant decrease in mortgage qualifications post-recession, but some are worse than others. Beyond the cost of rent itself, renter individuals and households face other city-specific factors beyond their control, namely transit accessibility and proximity to good schools and jobs.As a comparison of these factors for renters in cities, here are two of the least expensive rent metros (Atlanta and Phoenix) compared to two of the most expensive rent metros (Los Angeles and Miami). 

Atlanta

Atlanta is home to a mix of high-income, high-expense urban singles and college or graduate students, rendering it a popular choice amongst young leaseholders. The median household income falls at $34,770 and the median rent price is $1,235. However, the figure is likely affected by the large student population, who might lack full-time salaries. The average commute time in Atlanta is about 28 minutes, slightly higher than the national average of 26 minutes. Almost 80 percent of Atlanta residents don’t have kids, but the school ratings are relatively high. There are 155 primary and secondary schools educating about 12 percent of Atlanta’s total population. 

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Phoenix

Phoenix boasts more of an eclectic mix of citizens than other major metros in the United States. For instance, many non-natives choose Phoenix as their first mainland city from Puerto Rico, U.S. islands or foreign countries. The area is considered more of a melting pot, and the median list price for rentals is lower than that of most cities at $1,050 per month. A decent number of families are living off of single-incomes - one stay-at-home parent and the other a full-time employee. The median income is quite a bit closer to the national average than Atlanta at $41,207. However, Phoenix only has 471 schools. Out of those schools, 26 have a GreatSchools rating of 10 - the highest possible. While families might benefit from the plethora of options, the commute time is high at 28 minutes. 

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Los Angeles

Los Angeles is famous for celebrity and rich venture capitalist residents. But as a whole, the city of angels is rather diverse. The median household income is $36,687 and most residents are singles living on tight budgets or non-natives recently relocated to the United States. Median rents are still steep, coming in at $2,100 a month, due to high-priced neighborhoods that influence city averages. Bel Air’s median rent is valued at $9,299. Although slightly less pricey, Venice still has a median rent of $4,097. Even Watts, which is one of the neighborhoods in L.A. with the least expensive median rent, runs residents $1,722 per month on average. Most SoCal natives don’t have children, but school ratings still impress. L.A. contains 973 schools and includes well-known districts like Beverly Hills Unified and New West Charter Middle. Characteristically, one major drawback of living in L.A. is the infamous traffic. The average time it takes for residents to get to work is around 31 minutes. 

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Miami

Non-natives think of Miami as a vacation spot rather than a primary locale. However, many frugal families, immigrants and multi-lingual suburban dwellers call Miami home. High-priced, centrally-located apartments and homes that feature views of Miami Beach tend to raise the averages. Those who live outside of the city suffer through traffic at an average of 29 minutes per commute, so a high price tag might be worth the convenience for some. While there are 165 primary and secondary schools in Miami for residents with kids to choose from, only 14 have GreatSchools ratings of eight or higher. The popular Brickell neighborhood costs residents $2,355 per month in rent, which is up 4 percent from last year alone. Rents in the South-West Coconut Grove region increased an astounding 16 percent in the last year and currently, apartments rent for $3,293. Not only is the median rent costly for upscale neighborhoods, it’s on the rise for most regions. 

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So what about renters struggling with high costs, lower incomes and stretched budgets? Lower-income families often can’t afford to relocate to a more affordable city, especially if they’re dependent on their current jobs, daycare providers and nearby family members or friends for support. In the already expensive areas like L.A. and Miami, renter households have no choice but to try and stay afloat when more than half their income goes to housing.

Even in the less expensive cities like Atlanta and Phoenix, without an extended lease or rent stabilization, rents can easily begin to rise. In any city, we can assume prices will eventually rise to coincide with increasing demand.

Without more affordable housing options in cities, a large number of people - who need rental housing the most - will simply be priced out. 

bioimageJennifer Riner currently lives in Seattle and writes about real estate, rental management and home improvement for Zillow. Follow her on Twitter @jenniferriner.