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3 Most and Least Affordable Rental Housing Markets

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"Affordable rental markets may offer solid investment opportunities for investors and landlords but be aware of how much of a tenant’s income will go toward their rent when establishing an investing strategy."

HomeUnion recently released its annual report on the most- and least-affordable rental housing markets in the country, and Chicago, Illinois, topped the list. “With its low cost of living, relatively large housing inventory levels, and high affordability, Chicago is an excellent market for residents entering the renting pool,” said HomeUnion’s director of research, Steve Hovland. He noted that Chicago is the only metro area in the country where a typical renter can spend only about a fifth of their annual income on housing, and added, “Emerging neighborhoods like Logan Square…have become increasingly popular areas for young professionals.”

Most Affordable

Linda Liberatore, president of Chicago-based nationwide property management company SecurePayOne and a Think Realty coach, observed, “Chicago’s appeal to national and international business makes this affordable housing status even more appealing to new residents. With its rich culture and diversity, the metro offers so many options [to residents].”

Second on the list of most-affordable metros was Charlotte, North Carolina, which posted average annual rents around $16,000. That amount equates to roughly a quarter of the average income of a typical resident in the area, and Hovland said that this percentage makes Charlotte an attractive metro area for Millennial’s as well. Minneapolis, Minnesota, rounded out the top three.

Least Affordable

On the other end of the spectrum, HomeUnion tapped Oakland, California, as the most unaffordable housing market for renters in the United States. In fact, according to the report, renters in Oakland spend more than half of their annual income on housing. Hovland cited “intense demand for rental properties and high mortgage costs for owner-occupied housing” as reasons for this relative unaffordability in “the Bay Area, Denver, Southern California, and Washington, D.C.”

Cincinnati, Ohio, was named the second-least-affordable market, and Salt Lake City, Utah, the third. Hovland warned that ongoing issues with affordability in Ohio, specifically, could result in the migration of young renters to more affordable metro areas, like Chicago, or to comparably expensive metro areas like Denver, the Bay Area, and Los Angeles, since strong local job conditions in these areas could incentivize the move even though housing will still consume a large portion of the young renter’s budget. If this happens, “mostly low-wage earners” will remain to occupy rentals in Cincinnati and other Ohio housing markets where rents are rising faster than wages.

Investor Insight: Affordable rental markets may offer solid investment opportunities for investors and landlords but be aware of how much of a tenant’s income will go toward their rent when establishing an investing strategy.