The affordability of market-priced apartments is not a major concern for landlords as wage income growth scales with rent increases, according to the 2022 Market-priced Apartment Affordability Report released Monday by RealPage at its RealWorld conference in Las Vegas.
The report showed that market-rate residents nationwide spend 23.2% of their income, well below the oft-cited 33% affordability ceiling. The 23.2% measure is slightly above pre-pandemic norms.
Plus, according to Jay Parsons, RealPage’s chief economist and industry director, “it won’t be a problem as long as wages keep rising. There has been massive, well-qualified demand for apartments even though rents have gone up, and that’s why vacancy rates remain low and rents high.
Continued inflation would be problematic
Rents, like almost all expenses in today’s inflationary market, are rising at the fastest rate in more than 40 years, which has shed light on affordability, Parsons said.
Median household income for market rate apartment renters so far in 2022 hit an all-time high of $75,000, up 15.4% since 2020.
During the same period, the median monthly rent for a new lease jumped 21.9% to $1,510 nationally.
“It reversed an eight-year trend of declining rent-to-income ratios,” Parsons said.
Carl Whitaker, director of research and analytics for RealPage, added in prepared remarks: “Apartment renters are spending slightly more on rent than before the pandemic, but many could still be stretched as other expenses, especially food and gas, are climbing at much faster rates. We are closely monitoring rent collection trends and so far market rate tenants continue to pay rent at normal levels.
Rent paid on time
According to the report, the percentage of billed rent collected has consistently hovered between 95% and 96% since the pandemic hit in March 2020.
“Previously, collections had a slightly higher trend of 96% to 97%,” according to its statement. “High recovery rates in the market-priced apartment sector are one of the reasons why late rent payments and evictions have never increased as much as some feared.”
The RealPage Market-Rate Apartment Affordability Report reflects the first study to capture the incomes and rents of the same households at scale, with nearly 7 million individual leases included.
Previous studies have mixed different sets of data on rents and wages. This creates a misleading view of affordability, in part because most publicly available rent data leans toward more expensive, professionally managed rentals, while publicly available income data covers a much larger population. wider.
Lack of housing is a bigger problem
Parsons said “obviously” market rate affordability isn’t the issue.
“The real problem is the severe shortage of real affordable housing for the millions of households who cannot afford to rent or buy,” he said. “It’s a separate challenge that’s too often confused with affordability among existing renters at market rates. We need a lot more housing across the country, especially affordable housing.
RealPage’s study was limited to tenants of professionally managed market-rate apartments signing a new lease from RealPage software, where property managers record household income from lease applications as well as rates signed monthly leases. RealPage calculated the rent-to-income ratio for each lease, then took the median ratio.