It’s a new month, which means it is time for our commentary on the state of multifamily! We have some new data this month thanks to our pals at ABODO. Rent has heightened once again, and it looks as though it is at its peak for this year. With rent increasing, there is a huge concern at hand with tenants struggling to pay rent and potentially moving out.
Highest Rents in the U.S.
Cleveland continues to raise its rent. This month, the median rent for a one-bedroom increased by 6.5%, from $767 to $817. Following Cleveland are Indianapolis at a 5.4% increase, and Denver at 4.4%. Of course, San Francisco remains at the top of the list of highest rents in the country. Currently, the median rent for a one-bedroom is $3,3o3.
Landlords and Owners Potentially Face High Turnover
Many Americans are cost-burdened, spending more than 30% of their income on rent alone. Rent has been somewhat volatile throughout 2017, but with the spike this month, tenants are stressed and ready to move out. Back in 2015, 7% of renters failed to pay rent on time. Additionally, 27.5% of those who earned $30,000 or less a year failed to pay rent at least once in the past three months. Disposable income is growing at a very slow rate, and many are feeling helpless. Because of the rise in rent, apartment vacancies could increase in the next year.
Property managers of Class A and B apartments could increase rents without facing a major threat of turnover. However, because renters of these buildings have higher income, they could afford to move if they desired. These renters’ incomes range from $50,000 to $80,000, and they spend only around 20%-24% of their income on rent.
Aside from eviction, there are other unfortunate events of not being able to afford renting an apartment. Some have to give away their pets, or even worse, euthanize them to afford rent. Those who do move out face struggling for months to find a new place or high moving costs, and others have no choice but to move far away from their family and friends.
Is Owning A Home Achievable?
Other than not being able to afford rent, there is another rising concern that is directly associated with high rents. Because rent is a huge cost burden to many Americans, some Millennials are finding a path towards ownership more affordable. Tertiary cities such as Grand Rapids/Wyoming, Michigan; Des Moinses, Iowa; and Minneapolis, Minesota boast low average home down payments.
About 80% of young adults say that they would like to own a home one day. However, studies show that those with a college degree and debt are less likely to purchase a home because they have no means to without digging themselves even more in crippling debt. In cities like Los Angeles, which has an average home down payment of $112,033 and average one bedroom rent of $2,032, it’s no wonder instances of homelessness are skyrocketing.
Overall, tenants are struggling to pay rent, and landlords and owners could feel the burn soon. Unless change happens regarding affordable housing, many young adults will not be buying homes anytime soon, and the renting population will grow.