Suburban Rents Rising Faster than Urban Rents

A report by Zillow Research, Rents Are Climbing Faster in Suburban than Urban Areas, shows that for the first time in four years the median monthly cost of a suburban rental home had a greater year-over-year percent increase than the median cost of an urban rental home. Suburban rents increased 2.5% while urban rents increased 2.3%. The report suggests that the rent increase is partially due to the difficulty of accessing homeownership, which keeps demand for rentals high.

Homeownership remains out of reach for many renters, particularly low income renters in tight real estate markets. In San Francisco, a low-income renter would have had to spend 66.8% of his or her income on a mortgage in the second quarter of 2015. In addition, rental prices in urban areas are pushing renters to seek lower rents in the suburbs. Growing demand for suburbs is especially apparent in hot urban markets. In San Francisco, suburban rents climbed 2.6% while urban rents dropped .4%

Rental demand may also be linked to the foreclosure crisis. Laws prevent many foreclosed homeowners from purchasing another home for seven years. Previous homeowners may now be renting the same type of housing – namely single-family homes - they previously owned. The share of single-family homes that are rented increased from 12.7% in 2005 to 19.2% in 2016. The greatest increases occurred in metro areas with the highest foreclosure rates. The high concentration of single-family homes in the suburbs may attract households that want more space but are unable to access homeownership. The report concludes that the trend of increased suburban rental demand will continue as long as ownership remains out of reach for many renters.

Rents Are Climbing Faster in Suburban than Urban Areas is available at: