10 Cities Where Rent Is Rising Fastest

With rents rising at a rapid pace over the last several years, it should come as good news that prices may finally be starting to level off in some of the country’s priciest metros. Nationwide, rents for the single-family housing market are forecasted to rise 1.7% over the next year – the same rate of appreciation we saw over the past 12 months – according to the latest Zillow Rent Forecast report.

Overall, Zillow expects rents to rise in 34 of the 35 largest U.S. metros (all but St. Louis), although about a third of those markets are expected to report slower growth than the national average (1.7%), and 11 will see a slowdown in rents compared to last year. “There is good news for renters on the horizon,” says Dr. Svenja Gudell, Zillow chief economist. “Current renters in these markets can expect rents to slow down a bit over the next year. Instead of the 10% rental appreciation we’ve been seeing in some places, expect growth more along the lines of 4 to 7%.” (For more, check out 6 Tips for Renting an Apartment.)

10 Cities Where Rents Are Rising the Fastest

Rents are expected to rise the most in two West coast tech hubs – Seattle and Portland – where prices will likely increase by 7.2% and 6%, respectively. Other tech job centers will see an increase, as well. Following are the 10 cities where rents will rise the most over the next year, according to Zillow, along with each city’s forecasted rent increase and this month’s median monthly rent for a one-bedroom unit (from the Zillow Rent Index):

 

Metro

Forecasted rent increase

Median monthly rent

Seattle

7.2%

$2,067

Portland

6.0%

$1,777

Denver

5.9%

$2,013

Cincinnati

5.2%

$1,239

San Francisco

4.9%

$3,406

Los Angeles (includes Long Beach and Anaheim)

4.8%

$2,593

Sacramento

4.7%

$1,681

San Diego

4.7%

$2,427

Phoenix

4.6%

$1,297

San Jose

4.5%

$3,517

 

Affordability

Millennials are drawn to tech centers like Seattle and Portland for the jobs and high salaries, but high demand for the relatively small number of rental units drives up rents. “High rent growth in these markets is being driven by high demand and low supply,” says Zillow’s Gudell. “We have more renters today than in the past and most newly formed households are renter households.”

In many cases, renters are spending well above the recommended 25% to 30% of gross monthly income on rent (the U.S. Department of Housing and Urban Development considers a household to be burdened if it spends 30% or more of its income on rent). A recent study from online apartment listing marketplace ABODO, for example, found that the majority of renters in Los Angeles (which includes Long Beach and Anaheim; 59%), San Diego (57%) and Sacramento (54%) spend more than 30% of their incomes on rent each month.  

Rising Rents and Homeownership

Rising rents mean that people have less money to spend each month – and less money to save. One consequence of this is that homeownership has become out of reach for many: With no way to save for a down payment, even those earning a good income have trouble getting a mortgage. At 62.9%, the rate of homeownership is the lowest it’s been since 1965, when the U.S. Census started keeping track of the metric.

Of course, there are nonfinancial reasons behind the drop in homeownership, including delayed life choices to marry or have children, but high rents don’t help. According to a recent Zumper Renter Survey, the overwhelming majority of renters in 10 of the nation’s largest metros (including six of the 10 metros where rents are rising the fastest) would choose homeownership if they could overcome the financial hurdles to traditional mortgages: namely, the large down payment requirements.  (See How to Get a No-Down-Payment Mortgage and Using Your Savings on a Mortgage Down Payment.)

 “Broadly speaking, the falling homeownership rate is a sign that renting isn’t only for those just starting out or making a transition, but is becoming an increasingly viable longer-term option for many households,” says Gudell. “It also means incomes are not yet rising quickly enough to broadly support new homeownership, and that inventory remains too tight to allow for meaningful access to affordable housing.” 

The Bottom Line

Rents are expected to rise in 34 of the 35 largest metros in the U.S. over the next year, though at a slower pace than we’ve seen during the past couple of years. While high rents leave many households burdened because they spend more than 30% of income on rent, pricey rents also make it hard to save to buy a home, which is something that affects not only individuals and families, but entire communities. According to a report from the National Association of Realtors, homeownership fosters a sense of community, reduces crime rates and brings stability to neighborhoods. 

You may also be interested in reading Should You Buy or Rent a Home? and Comparing the True Costs of Buying vs. Renting.