Photo: Robert Clark
Job growth in urban areas is nearing peak levels, resulting in a boom in demand for housing in American downtowns.
However, the vast majority of renters find themselves priced out of these “first-rate” or prime locations, according to a report released this week by the listing site RentCafe.
“A first-rate location typically refers to apartments in or near central neighborhoods which also happen to overlap with most cities’ central business districts with high concentrations of jobs, as well as more entertainment, shopping, and dining within walking distance,” RentCafe writes in the report.
Unsurprisingly, the cost of land in these prime locations tends to be higher than those found in “less desirable” areas, which results in comparatively higher rents.
A “location upgrade” — simply moving to a more “desirable” area — can end up costing renters as much as four times what they can afford.
Currently, the national average rent for an apartment in a top-rated area is $1,655, which is 37 percent, or $444, higher than the average asking rent in a lower-rated area.
Over the last three years, rents in low-rated locations grew faster than in first-rate locations — despite the fact that more apartments were built in less-desirable locations. Demand for affordable housing has renters flocking to areas with cheaper rents, ultimately fueling price growth.
Some 60 percent of renters said they couldn’t afford to pay more than an additional $100 per month to live in their preferred location, while a whopping 83 percent claimed to live in a less than ideal location. This was especially true for Millennials, who made up over 70 percent of the 2,000 renters surveyed by RentCafe for the report.
And for most renters, an “ideal” location is one that is both close to work and walkable.
Renters in some cities are paying even more for a pad in a top-rated location, with rents in prime areas soaring 50 percent or more above average rents in lower-rated areas.
Chicago, IL, St. Louis, MO, Philadelphia, PA, Houston, TX, Brooklyn, NY and Memphis, TN rank among the toughest for renters hoping to make a location upgrade, with Chicago ranking as the toughest US city to make a location move. (In this report, RentCafe considers Brooklyn a city in and of itself.)
The average renter in Chicago will pay 79 percent more to live in a prime location — nearly $1,000 more per month.
In Brooklyn, average rents were 50 percent higher in prime areas, forcing renters to pay out an additional $1,229 per month to live in their ideal location.
Meantime, renters in Seattle, WA and San Diego, CA would need to pay less than an additional 10 percent per month to live in a prime location.
This seems to be at odds with the fact that Seattle and San Diego are two of the most expensive housing markets in the country, but in these cities average rents are high in most locations — including the lower-rated ones.
The study covered a total of 50 US cities with a minimum population of 100,000 and at least 2,000 units in each category (top-rated and low-rated). RentCafe considered top-rated locations (also referred to as “good locations” and “prime locations”) all rental apartment buildings that received location ratings of A+ to B+ and low-rated locations (also referred to as “average and below-average locations”) those rated B and below.
Click here to read the entire report.