Why Rents Are Rising Faster In The Suburbs

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The Editors's picture
Rents rising in the suburbs Zillow study says

Rents are rising in the suburbs as many renters are looking outside of city centers for more affordable housing, causing rent payments to grow faster in the suburbs than urban areas

As rents become more expensive, renters are starting to look for cheaper housing options outside downtown cores, according to a release from Zillow.

For the first time in four years, suburban rents are rising faster than urban rents

  • The monthly cost of a suburban rental in the U.S. is up 2.5 percent, while the cost of an urban rental is up 2.3 percent. This is the first time in four years that suburban rents are rising faster than urban rents.
  • Suburban rents are outpacing urban rents in Nashville, San Francisco and Seattle, which are all hot housing markets. In Nashville, the cost of an urban rental is up 1.7 percent, but the cost of a suburban rental is up about 5 percent.
  • In San Francisco, the price of an urban rental is falling, down 0.4 percent since this time last year, but suburban rental prices are up almost 3 percent year-over-year

"Because walkable urban centers close to amenities are typically a big draw for renters, you'd expect rents to rise faster in the city than in the suburbs -- which is exactly what we've been seeing until very recently," Zillow Chief Economist Dr. Svenja Gudell said in the release.

 "But a handful of factors are helping turn the tables and beginning to push suburban rates up at a higher clip. These include:

  • Deteriorating rental affordability in expensive urban cores
  • New apartments, albeit high-end ones, opening downtown compared to relatively few in outlying areas
  • Preferences among some renters toward the space offered by single-family homes in the suburbs.

“Rents themselves are still lower in the suburbs, but if demand keeps growing for suburban rentals and supply continues to lag, that will also start to change,” Gudell said. “ As more formerly urban renters move to the suburbs in coming years, we'll likely start seeing more apartment buildings and walkable amenities popping up in those communities."

Multifamily construction a factor in rising rents

Rents rising faster in the suburbs than in urban core Zillow reports

An increase in multifamily construction has slowed rent growth across the country, with rents rising at their slowest pace in five years.

The suburbs often offer larger apartments and more single-family homes for rent with more space -- about 19 percent of all single-family homes in the U.S. are rentals, up from 13 percent in 2005.

In the U.S., the median monthly cost of a suburban rental is up about 2.5 percent year-over-year, while the median cost of an urban rental is up 2.3 percent. At this time last year, the median urban rental price was up 5 percent year-over-year, while median suburban rental prices were up 3 percent.

The trend is more pronounced in booming housing markets where rent affordability is worsening. Rental rates in the Nashville, San Francisco and Seattle metro areas are growing faster in the suburbs than in urban areas as rising costs force renters out of the city, increasing demand in the suburbs.

Over the past decade, the share of income needed for the median rent payment in the San Francisco metro has increased from 34 percent to 44 percent. In the Seattle metro, the share has increased from 26 percent to 32 percent.

Expensive coastal cities are coming off about a decade of rapidly rising rents. Years of increases have pushed urban living out of reach for many renters, who may be choosing a longer commute in exchange for cheaper rental payments. Rent affordability is a significant issue for renters across the country, and in many major metros, the share of income needed to pay rent well surpasses 30 percent.

The price of an urban rental in Nashville is up 1.7 percent since this time last year, but the price of a rental in the suburbs is up almost 5 percent, with the median price of suburban rentals almost $500 less than an urban rental, despite many suburban rentals offering more space.

Rents growing in Seattle

Rents in Seattle are growing strongly across the metro, but the median price of suburban rentals is growing faster than the price of urban rentals by about 2 percentage points.

In San Francisco, urban rents are down 0.4 percent since this time last year, but rents in the suburbs are up 2.6 percent.

The median rent price of a suburban rental is about $350 less than an urban rental in San Francisco.

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