Class A Multifamily Tenants Face Highest Rent Increases

While higher-income renters are facing the largest percentage increases in rent, lower-income renters are paying a larger share of their income toward rent, according to a new research report issued this week by RealPage.

Its 2022 Market-Rate Apartment Affordability Report, presented Monday at RealPage’s RealWorld users conference in Las Vegas, is based on 7 million leases signed through RealPage customers.

The median rent-to-income ratio for the luxury Class A segment measured 20.5% compared to 22.1% in the Class B segment and 24.5% in the lowest-price Class C properties.

Carl Whitaker, director of research and analysis for RealPage, tells GlobeSt.com that Class A renters are showing to be well-educated, with good jobs, earning higher salaries in non-service industries.

Pittsburgh Has Lowest Income-to-Rent Ratio

Pittsburgh fared best overall in the rent-to-income ratios by metro areas at 18% with Riverside, Calif., at the highest mark of 26%.

“The vast majority fall within the 20% to 25% range,” according to Jay Parsons, chief economist and head of industry principals at RealPage, in prepared remarks.

“The results show that, as expected, pricier markets require much higher incomes,” Parsons said. “The median income for a market-rate apartment household measured around $150,000 in San Jose, San Francisco, and New York. Incomes also reached six-figures in Los Angeles, Anaheim, Oakland, and Boston.”

Renter household incomes were lowest in Memphis, New Orleans, and Greensboro at about $42,000.

“Apartment renters are not (yet) doubling up with roommates more frequently to share rising rental costs,” Parsons said, citing a trend that developed during the Great Recession in 2008-10. 

Leases signed in 2022 averaged 1.63 occupants, compared to 1.65 in 2020 and 2021.

There’s a ‘Massive’ Well-Qualified Demand for Apartments

The median age of apartment renters came in at 31.4, equaling 2019’s pre-pandemic norm, Parsons said. “This suggests older, would-be homebuyers are not propping up apartment demand and renter incomes.”

The study shows that market-rate apartment affordability is not yet a major concern, “and won’t be so long as wages continue growing,” Parsons said. “There’s been massive, well-qualified demand for apartments even as rents have increased, and that’s why vacancy remains low and rent collections high.”