Key highlights:
- Year-over-year rent growth was positive in all 10 markets and across asset classes; on a trailing three-month (T3) basis, overall rents fell in three metros—San Antonio, Detroit and Albuquerque. These same three posted declines in Renter-by-Necessity∗ rents.
- Houston and Columbus led in deliveries. No developments came online in Albuquerque through April.
- Tight rental markets in Cincinnati and Detroit with occupancy above 96 percent. Occupancy fell in all 10 metros, led by San Antonio (-2.5 percent) and Detroit (-1.8 percent). RBN occupancy in San Antonio posted the largest year-over-year decrease, down by 2.9 percent to 90.9 percent in February.
- Absorption rate was positive in all except three metros—Detroit, Indianapolis and Albuquerque. St. Louis posted the best absorption rate, up 1.6 percent in December.
- Six metros registered negative net migration, led by Detroit (-64,508 residents); at the other end was San Antonio with a population gain of 59,392 residents.
Affordability hard to come by
Affordable multifamily markets are rare, more so post-pandemic. Before the health crisis, metros located farther away from gateway cities used to boast more attainable rents. Then, the sudden-imposed work-from-home practice morphed into a new way of living.
Eliminating daily commutes enabled people to redesign their lives and suddenly, housing affordability improved, as long as relocation was considered. Throngs of people moved around the country in search of this now reachable next-level lifestyle, one knitted together from affordable housing with better amenity packages and an overall lower cost of living.
We looked at the 154 markets tracked by Yardi Matrix, and found that, as of early May 2023, only 36 had the average Renter-by-Necessity (RBN) asking rent below $1,000—examples include Baton Rouge, La., Huntsville, Ala., El Paso, Texas and Tulsa, Okla. The next level comprised metros with rents between $1,000 and $1,500, and 84 markets fit into this band, including the 10 metros presented in this ranking. Another 25 metros had average rents exceeding $1,500, including Philadelphia, Orlando, Portland, Denver, Miami and Washington, D.C., while six markets had rents above $2,000 but below $2,500, including Boston, Los Angeles and San Diego. The least affordable multifamily rental markets were New York, San Jose and San Francisco.
In this list, we selected the top 10 most affordable major multifamily markets by average rent in the working-class RBN segment. We’ve also pulled out Yardi Matrix data related to supply expansion, occupancy and absorption and paired it with population data from U.S. Census and mobility data from placer.ai.
1. Kansas City
Kansas City was the most affordable major multifamily rental market, with the average RBN rent at $1,031 as of March, up 1.5 percent on a T3 basis and 8.0 percent above the rate posted in March last year. Here, RBN rent payment accounted for 23 percent of the area’s median income, the lowest rate in this group, on par with Cincinnati and Pittsburgh.
In 2023 through April, deliveries represented 0.6 percent of total stock, on par with Cincinnati. Last year, the metro’s stock expanded by 0.9 percent. The occupancy rate in stabilized properties slid just 40 basis points year-over-year through February, to 94.2 percent, marking the second-lowest decline among the markets in this ranking, behind St. Louis. Furthermore, in 2022, the 165,423-unit inventory had an absorption rate of 1.0 percent.
Outmigration was greater than in-migration in Kansas City in 2022, by 6,454 residents, according to placer.ai’s mobility data. Still, since the 2010 Census, the metro’s demographic has been on a steady upward trend up 9.2 percent through 2021, ahead of the 7.3 percent national rate.
2. St. Louis
Next in line was St. Louis, with the average RBN rent at $1,055 in March, a 0.3 percent increase on a T3 basis and up 5.9 percent year-over-year. Rent payments accounted for 24 percent of the metro’s median income, on par with Detroit and Indianapolis.
Developers delivered just one 87-unit working-class project through April, the equivalent of 0.2 percent of existing stock and trailing all other metros in this list except Detroit and San Antonio. Last year, St. Louis’ inventory expanded by 0.7 percent. Meanwhile, occupancy slid just 20 basis points in the 12 months ending in February, to 93.6 percent, posting the lowest decline among the metros in this group. Moreover, the metro had the highest absorption rate, at 1.6 percent for the year 2022.
St. Louis lost 21,299 residents to outmigration last year, as per placer.ai. U.S. Census data shows that in 2021 the metro lost 9,000 residents, and between the 2010 Census and 2021, its population expanded by just 0.7 percent, lagging the 7.3 percent rate for the period.
3. Houston
Texas metros have long been desired markets for multifamily owners. RREAF, which owns and manages assets in the greater Houston market, considers that “renter affordability is a factor that all multifamily investors must look at when they focus with an emphasis on providing quality workforce housing with or without a value-add component,” as stated by Melanie French, CEO of RREAF Residential.
Houston’s RBN average rent was just $5 above St. Louis’, at $1,060 in March. On a T3 basis, the rate rose 1.1 percent, while on a year-over-year basis, it increased 5.4 percent, the third weakest performance in this group. Monthly rent payments accounted for 26 percent of the area’s median income.
“We see rents beginning to stabilize after the unprecedented rent growth registered in the past two years. This is great for renters and coincides with a time when new construction units are finally coming on board. Some of the areas that seem to be hit harder, with supply surpassing demand, are in the Corpus Christi and Rockport, Texas areas. This oversupply has led to an occupancy rate below 90 percent,” explained French.
Houston led in deliveries, with 1,686 units coming online through April, or 3.0 percent of existing stock. In 2022, 18,573 units were completed, accounting for 5.1 percent of total inventory, well above the next market in line—San Antonio, where developers expanded the stock by 1.4 percent. This boost in multifamily construction was also fueled by a 40 percent year-over-year decline in single-family construction, said French.
Robust supply additions reverberated across the industry and dented the occupancy rate, which lost 1.8 percent year-over-year through February to 91.3 percent. “We are confident Houston will remain solid and strong long-term, as evidenced by revenue and rental rate growth despite a 10.5 percent reported vacancy rate,” added French, while RREAF’s occupancies have remained above 93 percent and rising. “Realistically, we expect occupancy and the more than 10 percent vacancy to remain flat in the areas where supply is increasing, even while rates continue to grow. Absorption is the key when we have 18,600 units that reportedly opened in the last 12 to 15 months. We are seeing slightly longer lease-up periods, but not anything insurmountable,” she said.
Houston had the second least constrained rental market among the metros in this group, behind San Antonio. Boasting a large inventory with 700,000 units, Houston had the second-best absorption rate, at 1.4 percent for the entire 2022, trailing only St. Louis. Outmigration was greater than in-migration in the metro, by 12,313 residents. Still, the metro’s population increased by 21.2 percent between 2010 and 2021, and by 1.0 percent (69,094 residents) in 2021. With the cost of living at about 8 percent compared to other U.S. markets and a population of roughly 7.3 million, demand will remain robust in the area, according to French. She also stated that Georgia, Arkansas and Alabama are other areas that post strong occupancy.
4. San Antonio
Fourth for affordable multifamily rents, San Antonio’s average RBN rent clocked in at $1,078 in March, down 0.2 percent on a T3 basis and up 5.2 percent year-over-year. Compared with the other two metros (Detroit and Albuquerque) that posted rent declines on a T3 basis, San Antonio’s was the lowest. Rent payment accounted for 27 percent of the area’s median income, the highest ratio among the metros in this list and equal to the national rate.
Deliveries nearly came to a halt, with just 78 units coming online in 2023 through April, the equivalent of 0.1 percent of existing stock, leading only Detroit. Last year, San Antonio’s stock expanded by 1.4 percent, or 5,165 units, the second-highest growth among the metros in the ranking. The metro had the lowest occupancy rate among the markets in this group, at 90.0 percent in February, and the most significant decline rate, down 2.9 percent year-over-year. Meanwhile, absorption inched up 0.3 percent or 607 units of the 215,764-unit inventory.
San Antonio was one of the fastest-growing metros in the U.S. The annual demographic expanded by 1.4 percent in 2021, while mobility data revealed a positive 59,392-resident net migration for 2022, leading all metros in this list.
“Across our portfolio, we are seeing steady occupancy and moderate rent growth, generally in the 2 percent to 4 percent range,” said Matt Picheny, founder & CEO of Picheny, owner and operator of almost 4,000 units in Texas.
5. Indianapolis
Indianapolis topped national rent growth ranks for the whole of 2023, and still made it in the pool with the most affordable multifamily markets in the U.S. The average RBN rent stood at $1,093 in March, following a 1.7 percent increase on a T3 basis, a metric surpassed only by Cincinnati. However, the metro led in annual rent growth, up 9.1 percent. Rent payments accounted for 24 percent of the area’s median income.
Strong demand has powered construction, with the metro’s stock expanding 0.9 percent in 2023 through April, or 484 units, ranking third in this group, behind Houston and Columbus. In 2022, developers delivered 1,665 units or 0.5 percent of existing inventory. Occupancy declined 1.3 percent in the 12 months ending in February to 93.0 percent, posting the fourth largest decrease in this list, surpassed by Houston, Detroit and San Antonio. Absorption was also negative, down 0.3 percent in 2022.
By net migration, Indianapolis was next in line after San Antonio in this group, but at a far distance. In 2022, in-migration surpassed out-migration by 18,544 residents. In 2021, U.S. Census data shows the metro’s population continued to grow, up 0.6 percent.
6. Columbus
Columbus ranked sixth of the top 10 most affordable multifamily rental markets, with average rent up 1.6 percent on a T3 basis through March, to $1,143, marking the third largest increase among the metros in this group. On an annual basis, RBN rents rose 7.2 percent. Monthly RBN rent payments accounted for 25 percent of Columbus’ median income.
The metro’s stock expanded by 1,306 units, or 2.3 percent of total inventory, through April, trailing only Houston in this ranking. In 2022, developers delivered 3,413 units or 0.9 percent of total stock. The occupancy rate in stabilized properties slid 60 basis points in the 12 months ending in February, to 94.5 percent for the RBN segment, with lower occupancy declines only in St. Louis and Kansas City. Absorption was healthy, at 1.1 percent for 2022.
In-migration was stronger in Columbus than out-migration, by 4,117 residents. In addition, in 2021 the metro’s population increased 0.5 percent, well above the 0.1 percent U.S. rate, while between 2010 and 2021, it shot up 12.8 percent.
7. Cincinnati
With the RBN average asking rent at $1,151 in April, Cincinnati was just $8 behind Columbus. Rents in the working-class segment led in recent growth, posting a robust 2.1 percent increase on a T3 basis. Furthermore, rents rose 8.8 percent year-over-year, not far behind Indianapolis. By rent as a percentage of median income, Cincinnati scored 23 percent.
Developers delivered 343 units in 2023 through April, 0.6 percent of total stock, on par with Kansas City. Last year, the metro’s overall inventory expanded by 1,958 units, the equivalent of 0.5 percent of existing stock. Occupancy dropped by 100 basis points in the 12 months ending in February, but at 95.4 percent, it remained healthy and on top of all the metros in this ranking. The absorption rate stood right above 1.0 percent of a 114,708-unit inventory. Out-migration led by 12,958 residents.
8. Albuquerque
Albuquerque’s RBN multifamily market was $6 less affordable than Cincinnati’s, with the average rate in the RBN segment at $1,157 in April, down 0.4 percent on a T3 basis. Yet, the rate rose 8.2 percent year-over-year, marking the third largest increase among the metros in this group. On a rent-to-income basis, Albuquerque was the least affordable of all, as rent payment accounted for 26 percent of the local median income, on par with Houston.
No multifamily deliveries were recorded in 2023 through April, and last year’s stock expansion was scarce, up just 0.1 percent (507 units). Occupancy declined by 100 basis points in the 12 months ending in February, to 94.3 percent. Absorption was negative, at -0.2 percent for 2022.
In-migration was slightly higher than out-migration, by 786 residents, per placer.ai. Still, Albuquerque’s demographics expanded by just 3.2 percent between the 2010 Census and 2021, according to U.S. Census.
9. Detroit
Detroit remained among the most affordable multifamily rental markets with the average RBN rent at $1,179, down 0.5 percent on a T3 basis through April. On a year-over-year rents in the metro rose just 3.3 percent, the lowest rate of the metros in this ranking. Rent payment accounted for 24 percent of the metro’s median income, the third largest ratio among the markets in this ranking.
Detroit’s multifamily stock expanded by 68 units in 2023 through April, up 0.1 percent, the lowest expansion in this group. In 2022, developers brought online 2,318 units, the equivalent of 0.6 percent of total stock. Occupancy dropped 1.8 percent in the 12 months ending in February, to 94.2 percent, on par with Kansas City. The metro also posted the largest negative absorption among the markets in this list, down 0.4 percent in 2022.
Out-migration was stronger than in-migration, by a solid 64,508 residents, according to placer.ai. Moreover, in 2021, U.S. Census data shows that Detroit’s population shrunk by 0.5 percent, following a great 2020 when demographics rose 1.5 percent.
10. Pittsburgh
Steel City rounded up the most affordable multifamily rental markets ranking, with the average RBN rent at $1,198, a solid 1.5 percent increase on a T4 basis through April. Year-over-year, rents posted a 6.3 percent increase. In addition, monthly rental payments accounted for 23 percent of the area’s median income.
Developers delivered 228 units in 2023 through April, 0.4 percent of total stock and on par with last year’s stock expansion. Pittsburgh’s occupancy stood at 95.4 percent in February, on par with Cincinnati, following a 0.8 percent decrease over 12 months. Absorption was healthy, at 1.3 percent for 2022, the third-best rate among the metros in this ranking.
In Pittsburgh, out-migration outperformed in-migration, by 9,501 residents. Moreover, in 2021, the metro’s population contracted by 0.6 percent compared to 2020.
Rent growth and occupancy will likely continue to moderate across the nation, affected by the drop in consumer confidence. An increasing number of renters are choosing to move in with family or roommates as uncertainty persists, with banks closing, interest rates rising and average one-bedroom apartment rates climbing above $1,500 per month. In addition, new stock is delivered while unemployment remains low.
“Consumer confidence will continue to be a concern, which can and will impact the housing market. During the pandemic shutdown, people realized that there is more to life than simply working. Focus has changed in many ways. Renters are looking for quality, peace of mind, affordability, safety and spending time with family and friends. Competition in multifamily has increased as the renter is more selective and willing to combine financial and family resources to live somewhere they feel safe and able to afford without constant worry of employment ending,” concluded French.
∗Yardi Matrix defines the Renter-by-Necessity segment as a multifamily quality segment spanning several categories, including double-income-no-kids households that can't afford the acquisition of a home or condominium, lower-middle-income households or gray-collar households, blue-collar households, as well as other categories that are in this renting pool.
