Today, Apartment Rent Growth Lives in the Suburbs

Short- and longer-term data is showing that rent growth in the suburbs has been outpacing that of urban markets since the pandemic – and even the year before that, according to Apartment List.

Across 39 large and medium-sized metropolitan areas, Apartment List found that since March 2020, rents in the suburbs of these metros have grown by 27.2 percent, on average, significantly outpacing the 19.8 percent average rent growth in the core cities that they surround.

Looking further back, Yardi Matrix’s data show renters are now the majority in 103 suburbs that were previously homeowner territory 10 years ago, and 57 others are expected to follow suit in the next five years, suggesting greater demand could help to spike rents.

Furthermore, between 2010 and 2019, the number of suburban renters grew by 22% — a number that dwarfs the 3% increase in suburban homeowners during the same period, Yardi Matrix reported.

Jeff Adler, Yardi Matrix, tells GlobeSt.com, “Suburbs in major gateway metros and migration market favorites have seen greater rent growth since the start of the pandemic, but that the direction going forward is more balanced.

“There has been a recovery in the downtown areas back to pre-pandemic levels (except for San Francisco, although rents have rebounded from their previous lows).

Spread Between Urban and Suburban Narrowing

The spread between urban and suburban living (monthly rental rates) has narrowed, as well as the spread Between Gateway and Sunbelt cities, “although it still exists,” Adler said.

Adler said that multifamily demand has started to tail down, as the absorption to completion ratio in 2022 is below 1, a sharp reversal from the strong levels of household formation a year ago.

“Many of these renter suburbs belong to the Miami, Washington, D.C., and Los Angeles metros,” Adler said. “Suburban living has been rewritten throughout the past decade as suburbs in the nation’s 50 largest metros gained 4.7 million people since 2010 — containing 79% segment which were renters, according to the latest U.S. Census data.

Today, about 21 million people rent a suburban home in the 50 largest U.S. metros — 3.7 million more than 10 years ago, according to Yardi Matrix.

According to Census data, most of these renters are Millennials and Gen Zs looking for housing options that better suit their budgets, as 55% of suburban renters are younger than 45 with median household earnings around $50,000.

Whipsaw Rents During Early Pandemic

Apartment List attributes much of this trend to the pandemic. When conditions quickly changed in 2021 – the large cities where rents had been falling quickly “turned a corner and began sharp rebounds, leading to a temporary narrowing of the rent growth gap between core cities and suburbs in early 2021.

“But suburban rent growth then proceeded to outpace core city rent growth again, even as prices skyrocketed in both sets of cities, driven by tight supply colliding with a surge in demand.”

Apartment List analysts Chris Salviati and Rob Warnock said that throughout the past year and a half, the rent growth gap between core cities and suburbs “has, for the most part, been continuing to gradually widen. The continuation of this trend indicates that this gap is not solely an artifact of early pandemic disruption.”

They said that this trend may have been starting to emerge even before the pandemic’s onset.

“In 2019, the average suburban rent growth of 3.1 percent solidly outpaced the 2 percent average growth of core cities,” according to the report.

They added that in large metros, the fastest rent growth is happening in the farthest-flung suburbs, attributing it to the remote work phenomenon.