What Is Driving Apartment Rent Growth in Certain Cities?

Apartment rent growth has softened considerably – into negative territory as a matter of fact – this year. The latest report from Realtor.com notes that for September overall prices were down 0.7% year over year. 

Yet that same report also finds that rents in Boston were up 4%, in Birmingham, AL they were up by 4.5%, in Cincinnati, by 3.6%, in Cleveland by 3.2% and in Indianapolis by 3%, among other examples. 

That there is a regional divide in rent growth is little secret. RealPage, for example, notes that East Coast apartment markets are outperforming those in the West. 

Some of this can be attributed to supply patterns around the country. But there are other factors at play as RealPage noted in its post. “East Coast gateway markets are exhibiting strength in the face of increased apartment supply volumes, while West Coast gateway metros are softening, despite less significant completion levels,” it said. The Northeast’s success is “a likely product of operators preserving occupancy amid so much new supply allowing renters more options.” 

There is also a demand phenomenon that is following certain trends, says Realtor.com Chief Economist Danielle Hale. One can be seen in large cities such as Boston where people are returning to the office and want apartments that are close in to their workplaces, she tells GlobeSt.com. 

Another key demand trend has been affordability, she says, noting that affordable units are the ones that are being most quickly absorbed by the market and can account for rent increases in places like Richmond and Oklahoma City.  “With more demand at affordable price points, this will put downward pressure on overall median rent as well,” she adds. 

“Areas that can meet this affordability criteria will do better but that is not the lion’s share of units coming to market.”