Texas has a number of attractive markets, including the Dallas suburbs of Plano and Frisco, which clock in at 26.4 percent and 25.8 percent. Dallas, Houston and Austin measure in at respectable 29.2, 30 and 31 percent, respectively. The west Texas city of Odessa outperforms all of these markets, with a ratio of 25.2.

Of course, it should be noted that cities that “perform” poorly – i.e. cities with a high rent-to-income ratio – are not necessarily markets that are struggling economically. Like any ratio, the figure can climb to excessive levels based on either a high numerator or a low denominator; in other words, it changes based on either expensive housing or a weak economy. While both sets of markets indicate locales developers will likely want to avoid, they also represent a proverbial tale of two cities, with depressed Flint, Michigan (49.3) on one hand, and gateway markets like Miami (40.0) and Los Angeles (36.8) on the other. While the gateway markets may have booming economies, incomes have not kept up with the pace of housing costs, which has made those cities particularly rent-burdened.

There are a host of factors that go into the decision of where to build, but the ability to add value is one of the most important. While many seek out markets that boast a strong economy or favorable rental rates, one of these alone is not enough to assure success. But by conducting a rigorous analysis – including an assessment of the rent burden in the local market – developers can put themselves in position to reap maximum value from their efforts.

Jillian Mariutti is director of debt and equity finance at Mission Capital Advisors. She can be reached at  [email protected]. The views expressed here are the author's own and not that of ALM's Real Estate Media.