Rent Growth Slows in Multifamily Markets With More Educated Tenants

Multifamily markets with a more educated tenant base posted weaker rent growth during the COVID-19 pandemic, as remote work opportunities remained concentrated among college-educated workers. 

In a new report, YardiMatrix senior analysts Ben Bruckner and Andrew Semmes note that a “negative, sizeable and statistically significant relationship exists between levels of higher education and year-over-year rent growth during the pandemic.” Put more simply, properties inhabited by a large proportion of tenants with a bachelor’s or post-graduate degree showed much smaller rent increases when compared to those with a less highly educated tenant base.

Expensive, coastal markets have shown the sharpest rent declines over the course of the pandemic, while affordable Sun Belt markets have recorded more robust growth. But “not every market fits this narrative,” according to Bruckner and Semmes: certain Western and Sun Belt markets posted flat or declining year-over-year rent growth in February, including North Dallas (0.7%), Denver (0.3%), Nashville (-0.2%) and Austin (-2.1%).  The answer, the pair say, lies in educational attainment. Overall, there is as much as a 10.06 to 17.12 percentage point reduction in year-over-year rent growth for properties where 100% of the over-25 age population held a bachelor’s or post-graduate degree, compared to those where the over-25 age population contained no college graduates. 

“Unquestionably, there are many different drivers to rental rate growth, and remote work was but one driver during the pandemic,” Bruckner and Semmes write in the report. “As the economy rapidly normalizes, the question for remote work is whether it will become a durable trend or fade out as life normalizes—and whether it will continue to affect multi-family rent growth as it did during the pandemic.” 

ApartmentList’s national rent index increased by 2.3% from April to May, and year-over-year rent growth is now at 5.4% nationally, though “significant regional variation” exists. Rents in San Francisco, though still 17% lower than they were in March 2020, have also increased by 13% over the past four months alone. San Jose, Washington, D.C., Boston, and Minneapolis have all also posted rent increases for five consecutive months.