An analysis by Zillow, titled Zillow Rent Index by Tier: Low-End Demand, High-End Supply, finds that the cost of low-rent apartments rose faster than rental costs in general over the past year in each of the 15 large metropolitan areas examined. Rental costs rose faster for low-rent apartments than for high-rent apartments in 7 of the 15 metropolitan areas. The author attributes this finding to the fact that demand for low-rent apartments is rising, but fewer than 10% of newly constructed units since 2014 are low-rent apartments. More than half of newly constructed units are high-rent apartments. The authors conclude that affordability challenges will continue as long as the mismatch continues between rising demand for low-rent apartments and new construction of high-rent apartments.
The report defined three tiers of rental units based on their estimated rent price. Low-rent apartments are the least expensive one-third of rental units in the metropolitan area and conversely, high-rent apartments are the most expensive one-third of rental units.
Zillow Rent Index by Tier: Low-End Demand, High-End Supply is available at http://bit.ly/2ay704F