At the annual RealWorld conference in Las Vegas, RealPage released its 2022 Market-Rate Apartment Affordability Report. The study captures incomes and rents for the same households on a large scale, with nearly 7 million individual leases included. The results show that renters signing leases so far in 2022 are spending only 23.2% of income toward rent. While that number is higher than pre-pandemic norms, it is below the traditional 33% affordability ceiling.
“The study shows that market-rate apartment affordability is not yet a major concern, and won’t be so long as wages continue growing,” says Jay Parsons, chief economist and head of industry principals for RealPage. “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.”
Like nearly all expenses today, rents are growing at the fastest pace in more than 40 years, which sheds light on affordability. This year, the median household income for market-rate apartment rents is at an all-time high of $75,000 (up 15.4% from 2020) but median monthly rent on a new lease raised to $1,510 nationally, or 21.9%.
“Apartment renters are spending slightly more on rent than they did prior to the pandemic, but many could still get stretched as other expenses, particularly food and gas, climb at much faster rates,” says Carl Whitaker, director of research and analysis for RealPage. “We’re closely watching rent collection trends, and, so far, market-rate renters continue to pay rent at normal levels.”
Other key findings include:
- Rent-to-income ratios by metro area range from a low of 18% in Pittsburgh to 26% in Riverside. The vast majority fall within the 20% to 25% range.
- As expected, pricier markets require much higher incomes. 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 Boston and Los Angeles, Anaheim, and Oakland in California.
- The median rent-to-income ratio measured 20.5% in the luxury Class A sector; 22.1% in the middle-rent Class B segment; and 24.5% in the lowest-price Class C properties.
- Renter household incomes were lowest at around $42,000 in Memphis, Tennessee, New Orleans, and Greensboro, North Carolina.
- Apartment renters are not (yet) sharing rising rental costs with roommates. Leases signed in 2022 averaged 1.63 occupants, compared with 1.65 in 2020 and 2021.
The study was limited to renters in market-rate, professionally managed apartments signing new leases. The data is collected from RealPage software, where property managers record household income from lease applications along with the signed monthly rental rates. RealPage calculated the rent-to-income ratio for each lease, then took the median ratio.
“This is a groundbreaking study that brings new light to the rental affordability topic,” Parsons says. “Clearly, market-rate affordability is not the problem. The real problem is the severe shortage of true affordable housing for the millions of households who cannot afford to rent or buy. That is a separate challenge that is too often conflated with affordability among existing market-rate renters. We need a lot more housing across the country, especially affordable housing.”
