By Jared McKinney
Rent has steadily been increasing, and the cost for even a humble apartment, in some cities, is higher than most people can afford. This increase has made it difficult for some to afford groceries and other essentials. Here's what you need to know about the average apartment rent and the factors that affect prices.
Average monthly rent varies dramatically depending on where you rent. Rent in popular cities in states like Hawaii, California, and Maryland can cost considerably more than rent in states like West Virginia, Arkansas, or South Dakota.
If you intend to rent in major cities like San Francisco, expect to pay considerably more for about the same apartment. For example, you can expect to pay around $1,600 a month to rent in Hawaii, around $1,000 to rent in Georgia or Rhode Island, and as little as $725 or $750 in West Virginia or Arkansas.
The cost of rent varies depending on the neighborhood as well. The rental market demands higher prices for few key reasons:
In general, demand largely determines rental prices.
Rent price often depends on the apartment’s features. You may pay more for a 2 or 3 bedroom apartment then you will for a one-bedroom apartment. Apartments with outside space like patios or yards might cost more than those without. Large kitchen and living spaces can also demand a higher price tag.
Granted, you can offset a more expensive average rent price for a nicer apartment by splitting the cost with roommates. Even more expensive apartments can sometimes be reasonable when rental costs are divided.
Not surprisingly, rent will likely be more expensive for more luxurious properties, such as those with pools, elegant kitchens, fenced yards, etc.
Price fluctuations will always exist because of the nature of the rental market, but trends in local years are showing some significant changes in the rental population. Whereas previously, most renters were limited to lower-income individuals, high-income tenants are increasing at a record-setting pace. From 2010 until 2018, significantly more renters had household incomes of $75,000 or more.
These renters might be long-term tenants or families with kids who might be able to pay more expensive rent. This new demand may be the result of higher earners having a difficult time finding houses to buy. New demand may also reflect a change in the rental market. Renters might value being able to move around quickly over becoming homeowners.
Another important change in rent averages is how much rent prices burden those who rent. People are spending more money on rent compared to their average income over the years, especially in the middle zones of household income. Whereas previously, people may have had plenty of money left after rent to save for buying a home and maintaining a high quality of life, now more and more people are spending most of their income on rent and living essentials.
Renters have seen a steady increase in what they pay their landlords. Cost burdened households pay more than 30% of their income for rent while severely cost-burdened households pay more than 50% of their income.
Another big change is in the type of property that is being rented. Most of the time when we think about renters, we think about apartments. However, the median rent for single-family homes has been steadily rising.
According to this chart, from 2008 to 2013, there was a significant increase in the number of single-family rental properties, from around 13,180,000 to over 15,750,000. Another significant difference is the growth of apartment housing with 20 or more units. More people are choosing to rent this kind of apartment over apartments with from 2 to 19 units. This indicates that perhaps a higher percentage of people who rent are either choosing long-term single-family homes in the suburbs or large apartment buildings in cities.
You probably aren't surprised to see rent prices go up. After all, rent is expected to increase steadily, especially in cities with a heavy renter’s population like San Francisco. But even beyond this, there are a variety of reasons for rent to skyrocket.
Airbnb has created an industry by changing the casual homeowner into a landlord. In some ways, it has revolutionized the way we rent.
There is some evidence that Airbnb has caused average rent prices to increase in places where it operates. The idea is that making it easier for someone who rents to choose short-term rent options can make it more expensive for those who want to rent for the long term. It may also increase demand for long-term rent by limiting the space available for this kind of rental property.
By some estimates, it can be close to impossible for most Millennials to become homeowners. As a result, individuals who can't afford to buy a house will likely rent. This is especially true in places where the cost of homeownership and rentals is increasing, such as Northern Carolina.
More renters mean that the price of even a simple studio apartment will increase. The price for someone who rents a nice apartment capable of raising a family in will certainly be on the increase. After all, more people who rent and less inventory mean more dollars per property.
Affordable rentals are more difficult to find than ever before. More of us are spending a higher percentage of our income on rent. With new demand for even small one-bedroom apartments on the rise in many cities, we can expect the average cost to keep going up.