Millennials Struggle to Afford Downtown Prices

CHICAGO—Job growth has soared in many downtowns as major employers like McDonald’s in Chicago and GE in Boston relocate their headquarters from the suburbs to city cores to attract tech-savvy Millennial talent. As a result, new office jobs and residential development in and near CBDs increasingly go hand-in-hand. But in spite of the construction boom, many still struggle to afford apartments near their jobs, especially Millennial renters, who make up more than 70% of the survey respondents.

Less than 17% of over 2,000 renters recently surveyed by RentCafe said they live close to their most-desired location, which for most is near their job, ahead of living close to friends and family, or near entertainment, dining, shopping or a gym. Furthermore, 43.2% of respondents said they could only afford a maximum of $100 more to live in their preferred location, and another 16.4% could not afford any such increase. The cost of rent was the top concern of those surveyed.

“An ideal location typically refers to apartments in or near central neighborhoods (although not always), which also happen to overlap with most cities’ central business districts with high concentrations of jobs, as well as more entertainment, shopping, and dining within walking distance,” according to RentCafe. “But the cost of land tends to be high in those locations, which drags up the price of rent.”

Using rent data and location ratings by Yardi Matrix, RentCafe found that nationally, the average rent charged by buildings in top-rated locations is $1,655/month, 37% more than the national average rent of $1,211 charged in lower-rated locations, a difference of $444 per month. “Based on the survey responses, the percentage of renters who can afford the price of a location upgrade is very very low.”

The $444 rent gap comes from comparing average rents in apartments in top-notch locations and apartments in average and below-average locations. Top-notch locations are close to good employment sources, and a high-quality mix of housing, shopping, entertainment and transportation.

At, 79.3%, Chicago had the largest gap between the average price between a rental in a top location versus a rental in a less desirable location. “The average renter is looking at almost $1,000 extra per month to rent an apartment in a top-notch location in the city of Chicago, which adds up to $12,000 extra in rent/year,” said RentCafe. “The average rent for an apartment in one of the best locations in the city is $2,182/month, while the average rent for an apartment in a second-rate location is $1,217/month.”

The other cities where this difference is higher than 50% are: St. Louis, Philadelphia, Houston, Brooklyn, NYC, and Memphis.

That eclectic list illustrates that these gaps do not have a one-size-fits-all explanation. In Chicago, the apartment market has boomed alongside the jobs market. In St. Louis, however, few rentals are available in good locations, resulting in a 63.5% price gap, the second highest on the list. The average rent in a top St. Louis location is $1,383/month, while the rent in an average or below average location costs $846/month.