You Really Don’t Want to Rent Here, Number-Crunchers Say
If the silver lining of the Philadelphia housing market is how affordable its homes for sale are, then the state of its rental housing market is the cloud.
Three recent surveys all ranked the Philadelphia area close to the bottom when it comes to the affordability of rental housing.
The survey where Philadelphia fared best was the one conducted by apartment search site Zumper.com. In its August survey of median rents for one- and two-bedroom apartments nationwide and in the 100 most populous metropolitan areas, Philadelphia ranked as the 16th-most-expensive rental market in the country, with a median monthly one-bedroom apartment rent of $1,330 in July. That figure is up 3.1 percent from both the previous month and the previous quarter but down 0.7 percent from last year. Relative to the other large cities in the Northeast, however, Philadelphia fared well: only Baltimore, the 23rd-priciest rental market, was more affordable.
Philly rated much lower in WalletHub’s ranking of the nation’s 150 most populous markets, placing in the bottom five at number 146. Below it were Detroit, New York, Hialeah, Fla., and Oakland. This, however, was a case where the whole was less than the sum of its parts: on the “rental market and affordability” scale, based on data for two-bedroom units, Philly ranked 130th, and on the “quality of life” rankings, it came in at number 137.
But the worst news, at least for those who can least afford it, came from a new Zillow study of rent appreciation by market segment released at the end of July. Because of an imbalance in the production of new rental housing locally, rents in the bottom third of the market shot up much faster than they did in the market overall or at the top end. While the Zillow Rent Index for the Philadelphia market rose 3 percent from year-ago levels, rents in the top tier rose 6.7 percent — and they jumped 17.9 percent in the bottom tier.
Only in four California markets did rents at the bottom rise faster than they did in Philly: Sacramento (32.7 percent), Los Angeles (27 percent), San Francisco (24.6 percent) and San Diego (21.7 percent). And the index for low-end apartments in Philadelphia ($1,102) is closer to the overall market index ($1,234) than it is in any of the other 14 markets Zillow examined.
“In Philadelphia, the majority of construction is at the high end — almost 70 percent — and therefore, supply is particularly tight in the bottom third,” explained Zillow Chief Economist Svenja Gudell. “Additional demand for rentals — especially at the bottom, as rental prices have been rising for quite some time — is causing low-end rental appreciation.”
As for why rent increases are greater at both ends of the market than they are in the market overall, Gudell said, “The tails of the price distribution often exhibit more extreme behavior. In this case, strong demand and little supply at the bottom, versus high-priced supply and also strong demand at the top, is causing this phenomenon.”
If there’s any comfort in Zillow’s figures, it’s this: lower-income renters will pay more for apartments in all but four of the other 14 cities, including all of those in the Northeast. The four where cheap apartments were cheaper than Philadelphia are, in order from lowest to highest: St. Louis, Tampa, Charlotte and Dallas-Fort Worth. Of those, on the whole, we’d rather be in Philadelphia.
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