TransUnion: Rents are rising faster than tenants’ income. U.S. apartment rents rose 14% from 2020 to 2021 but the median income of rental applicants is up 6%.
EASTON, Md. –Apartment rents are rising at a rate much higher than tenants wage gains as inflation and higher interest rates challenge the economy and real estate markets.
A new analysis by credit agency TransUnion (NYSE: TRU) found U.S. apartment rents rose 14% from 2020 to 2021 but the median income of rental applicants is up 6%.
The median income of apartment renters was $37,232 in February 2022 compared to $35,000 at the start of the pandemic in 2020, according to the credit agency.
Those tenants are feeling the impacts of inflation – including $5 per gallon gas prices and more expensive grocery items. The U.S. inflation rate is 8.6% – the highest since 1981.
High rental costs and the ability to work at home for office and professional workers is resulting in more tenants looking at out-of-state moves and relocations to rural and less expensive markets.
The credit agency said out-of-state applications for rental properties increased 42% from 2020 to 2021 during the coronavirus pandemic.
The same time frame found rental applicants grew by 28% in rural areas while applications in big cities rose 10%.
“With remote work firmly in the norm, we’ve seen renters actively seeking new locations that better suit their budgets and lifestyles,” said Maitri Johnson, vice president of tenant and employment screening at TransUnion. “While many are going out-of-state to sunnier environments, we’re also seeing a preference for rural areas and exurbs that have more space and a lower cost of living, but also a relative proximity to cities and airports.”
Pandemic migration trends have included residents moving out of New York and other expensive and congested cities for less expensive and less urban markets.
Areas such as Texas, Florida and Idaho have seen growth – sometimes at the expense of areas of the Midwest and Northeast. Some of those growth markets, such as Tampa, Orlando, Fort Myers, Fla., Dallas, Boise and Phoenix have seen significant jumps in apartment rents and other housing costs.
The remote work and cost dynamics could help propel more at-home workers to smaller and rural markets. Some Silicon Valley, San Francisco Bay area and Seattle tech and financial workers have already been moving to smaller markets in northern California, southern Oregon or Idaho.
Maryland’s Eastern Shore and areas of Delaware have also seen professionals and others moving from New York City, Washington, D.C. and Philadelphia. Some of those transplants from New York, California and Chicago are also relocating to Sun Belt and Western growth regions.
TransUnion reports the U.S. rental occupancy rates hit a record 98% in January 2022.
Some of that jump stems from applicants selling their homes and renting after moving to new locations and markets. TransUnion found a 37% increase in rental applicants who sold their home within the last year.
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