Posted by: Richie Bernardo

Homeownership isn’t for everyone. More than 111 million Americans have opted instead to rent their homes because of convenience, cost or both. But renting isn’t always a cheaper or better alternative to owning a property. Total expenses depend on the type of residence, the dweller’s income and local market health, among other important factors requiring careful consideration prior to signing a lease agreement.

Rental prices, for one, have soared over the years, according to a recent analysis of housing affordability by the Federal Reserve Bank of Kansas City. Between 2010 and 2015, median home rent grew an average of 2.3 percent year over year while personal income declined by 0.4 percent annually over the same period. And with demand for affordable housing exceeding supply, 11.1 million renters today spend more than 50 percent of their income on housing, a group that federal housing agencies describe as “severely cost-burdened.”

Like home prices, however, rental rates can vary significantly by region, state or city. And in some places renting will prove to be more cost-effective and a better overall value than owning.

To determine where renters can get the most bang for their buck, WalletHub’s analysts compared the 150 largest rental markets based on 21 key measures of attractiveness and living quality. Our data set ranges from historical rental-price changes to cost of living to jobs availability. Read on for our findings, expert insight from a panel of researchers and a full description of our methodology.

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/23010/geochart-renters.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2v744qq;  

Overall Rank	City	Total Score	‘Rental Market & Affordability’ Rank	‘Quality of Life’ Rank
148	New York, NY	35.51	134	147
149	Hialeah, FL	35.20	150	74
150	Oakland, CA	33.11	147	144

Ask the Experts < >

• Robert Kleinhenz Economist and Executive Director of Research at the UC Riverside Center for Economic Forecasting and Development at the School of Business Administration
• N. Kundan Kishor Associate Professor of Economics at the University of Wisconsin - Milwaukee
• Michael Reibel Professor of Geography at Cal Poly Pomona
• Herb Tousley Director of Real Estate Programs and the Shenehon Real Estate Center in the Opus College of Business at the University of St. Thomas
• Davida Finger Clinic Professor in the College of Law at Loyola University New Orleans
• Benjamin Keys Assistant Professor of Real Estate in the Wharton Real Estate Department at the University of Pennsylvania
• Andrew G. Mueller Assistant Professor in the Daniels College of Business at Denver University
• Aaron Hedlund Assistant Professor of Economics at the University of Missouri

Robert Kleinhenz Economist and Executive Director of Research at the UC Riverside Center for Economic Forecasting and Development at the School of Business Administration What tips do you have for a person looking to get the best value in an apartment? Be premeditative. What do you want “for your money” in terms of location, proximity to amenities, transportation options, commute time, and safety. For many young renters, budget will be the binding constraint, so they will face trade-offs and must make tough choices. That may mean getting a roommate to “leverage” your own monthly rent budget. Are the fastest growing cities a good place for renters? Why? Hard to say. A lot of places that are doing well economically (think San Francisco and the like) don’t have a lot of new rental units coming online. Average rent in San Francisco is over $4,000, so you’d better be earning a hefty paycheck. But there a lot of other cities across the country that are experiencing decent, if not good, economic growth, and are much more affordable for renters. For many, job opportunities in various cities will dictate where someone will move. How can local policymakers make housing more affordable for renters without upsetting homeowners? They need to challenge the perception that renters don’t make good neighbors. Higher density housing (that is, apartments) does not translate directly into more congestion, higher crime rates, and other problems. In fact, if a part of mixed use developments, developments that are home to renters may also offer such things as restaurants and convenience stores that serve the broader community. And policymakers, as well as real estate developers have to get ahead of issues, such as congestion and other potential problems, so the existing homeowners and residents know what to expect. N. Kundan Kishor Associate Professor of Economics at the University of Wisconsin - Milwaukee Are the fastest growing cities a good place for renters? Why? This depends on whether house prices have increased significantly in these cities. Usually, house prices tend to move much more quickly than rent and therefore, renting may make sense if prices have really outpaced rent in the last few years. The rule-of-thumb is that if the price of a house is more than 20 times its rental value, then it makes sense to rent the place. How can local policymakers make housing more affordable for renters without upsetting homeowners? One of the biggest issues in affordable housing in big cities is lack of supply due to zoning regulations. There are several studies in economics that have shown that even a small change in these regulations can have significant positive impact on the overall welfare, and will make housing more affordable. In evaluating the best and worst cities for renters, what are the top 5 indicators? I would say price-rent ratio, price-income ratio, unemployment rate, access to public amenities, crime rate and proximity to a major airport. Michael Reibel Professor of Geography at Cal Poly Pomona What tips do you have for a person looking to get the best value in an apartment? One could assume that renters are entirely footloose and have no constraints on where they live, other than the desirability of local rental markers. That is clearly not the case; renters are highly constrained in their choice of locations, not just by family ties but, by the availability of good-paying jobs locally. I have no special insight on how to optimize the apartment search process, other than the obvious advice to know your means and preferences, and find the best value that corresponds. How can local policymakers make housing more affordable for renters without upsetting homeowners? Innovative and effective affordable housing policy is complicated, but details aside, solutions on both the supply and demand sides will require vastly more funding for construction and rental subsidies than are currently feasible politically. In evaluating the best and worst cities for renters, what are the top 5 indicators? I might suggest that the only relevant “indicator” of a good city for renters is the relative cost of a given type and quality of apartment. But obviously it’s not that simple; the cheapest rental markets tend strongly to have fewer good jobs. Along the same lines, the fastest growing cities tend to have the most expensive rentals, but also the most well-paying jobs. So whether these cities are good for renters depends entirely on whether a given renter can get one of those good jobs. Herb Tousley Director of Real Estate Programs and the Shenehon Real Estate Center in the Opus College of Business at the University of St. Thomas What tips do you have for a person looking to get the best value in an apartment? Know ahead of time what kind of amenities you would be willing and able to pay for, don’t fall into the trap of signing a lease that will consume too much of your income. Consider how far you would be willing to drive to get into more moderately priced apartments. What are the most common mistakes that renters makes when searching for a new apartment? They haven’t prioritized what is most important to them, things such as a convenient location, amenities or the size of the unit that they really need. Are the fastest growing cities a good place for renters? Why? Fast growing cities will tend to have more jobs available, but in many cases, the population is growing faster than the supply of rental units. That situation will result in higher rental rate increases, as the supply of rental units is not able to keep up with demand. How can local policymakers make housing more affordable for renters without upsetting homeowners? Local policymakers need to promote the development of more workforce housing, and consider higher densities to allow more moderately priced rentals. It is also important to upgrade older properties in a way to accommodate a wider variety of renters at different income levels. An important part of the process would be to educate local residents as to what “workforce” really means. People tend to assume the worst when they hear the terms “affordable” or “workforce.” In evaluating the best and worst cities for renters, what are the top 5 indicators?

• Diversity and vitality of the local economy;

• Expected income and wage growth;

• The supply and diversity of rental housing;

• The unemployment rate or the availability of good jobs;

• The general economic health prospects for the area -- is the general trend increasing or stagnant?

Davida Finger Clinic Professor in the College of Law at Loyola University New Orleans How can local policymakers make housing more affordable for renters without upsetting homeowners? Local policymakers can improve rental housing, including affordability, by approving rental registry legislation that requires owners to register rental units with an agreement for government oversight on baseline habitability standards. By creating oversight on rental conditions, local policymakers can improve overall public health and minimize economic and emotional strain on renters, who become trapped in substandard units. Policymakers can also advocate for statewide standards that meet or exceed the best practices articulated in the Uniform Residential Landlord and Tenant Act, which sets norms for rental housing practices. Finally, investment in tenant unions and tenant organizing will go a long way toward realizing holistic visions for our communities, that includes safe and affordable housing for all. Benjamin Keys Assistant Professor of Real Estate in the Wharton Real Estate Department at the University of Pennsylvania What tips do you have for a person looking to get the best value in an apartment? When thinking about value, renters should consider ways in which their preferred apartment might differ from the average unit on the market. A generic unit in a generic building in a popular neighborhood is probably priced efficiently, but quirky buildings in quirky neighborhoods may deviate from the efficient market because of their idiosyncrasies. Put differently, renters should play “Moneyball” with the apartment attributes that they might value more highly than some residents. For instance, if your job isn’t downtown, then you probably shouldn’t pay the same premium to live downtown that others might be willing to pay for the short commute. Or if you like getting some exercise, then you might want to look for an apartment that’s a few blocks further from public transportation (and usually offered at a discount). If you don’t value certain building amenities as much as the average renter, then avoid looking at buildings that emphasize those features. Never planning on using that rooftop pool? Don’t subsidize the pool users, and live somewhere else more cheaply! Think about what attributes of an apartment are most important, and prioritize those attributes. You may find that your list is different from the list of other renters, and deals can be found. What are the most common mistakes that renters makes when searching for a new apartment? Remember to take into consideration the full set of costs of renting. Beyond the monthly rent, the utilities and any other fees associated with the building (e.g., parking spaces) can really add up. Another cost that renters might overlook is the cost of commuting, both in terms of money (for a car’s upkeep, or public transportation) and time. How much would you pay to reduce your commute from 30 minutes to 15 minutes? You’ll get back a half hour back every single workday, which is equivalent to over 5 days worth of commuting in a year of renting. Think about the costs and benefits of a particular unit and a particular location holistically, and don’t forget the value of your time. Are the fastest growing cities a good place for renters? Why? Many of the fastest-growing cities are also cities that aren’t adding rental units very quickly. This lack of new apartment supply is partly a function of geography, as cities like San Francisco face physical barriers (like oceans and hills) to adding new units. But there’s an additional factor related to local land use rules and regulations that makes building difficult in some cities. The height restriction in Washington, D.C. is a prominent example. This restriction forces new construction farther away from city centers, or to not occur at all. In contrast, some booming cities like Austin, Texas, has added a tremendous amount of new units in recent years, although it still hasn’t been enough building to keep up with demand. How can local policymakers make housing more affordable for renters without upsetting homeowners? More than anything, existing homeowners fear the unknown. Smart, transit-oriented development adds units near public transportation, doesn’t add to congestion on the roads, and often brings new amenities to neighborhoods that didn’t have enough density or activity to justify them previously. If homeowners better anticipated some of the perks of greater density nearby, they might be more willing to encourage new apartment supply. At the end of the day, the current high rental prices are a function of supply and demand. As mentioned above, the supply of apartment units remains tight in many markets, although some new development is in the pipeline. Local policymakers should seek smart development opportunities to increase density and provide amenities through new construction. Reducing barriers to zoning for 2-4 unit buildings in many single-family neighborhoods would certainly be a good start, but many cities would be well-served by completely overhauling their zoning restrictions. On the demand side, it’s still relatively difficult for most families to qualify for a mortgage, and the homeownership rate is at a 25-year low. The fall in homeownership has led to much more competition for rental units. One way to make housing more affordable for renters is to expand mortgage access. This would take some potential renters out of the people competing for scarce units, and instead drive up housing prices with more demand for homeownership, surely something current homeowners would appreciate. Families on the margin of owning vs. renting may want to reconsider owning given high rental costs, the low down payment mortgage products on the market today (you don’t need 20% down), and the likelihood that rates will rise in coming years. Underwriting standards are less strict than they were immediately after the crisis, and many families who were harmed during the foreclosure crisis will see their credit scores rise in coming years, so they may be able to re-enter the mortgage market if they so choose. Andrew G. Mueller Assistant Professor in the Daniels College of Business at Denver University What tips do you have for a person looking to get the best value in an apartment? For getting the best value in an apartment, I would generally say that going to a property that is a little older and has not been renovated can provide better value, if a renter is looking for more space and willing to forgo amenities, such as granite countertops. For example, in Denver, many of these older apartment complexes include community pools and workout facilities similar to newer properties, but are several hundred dollars cheaper. Some value can also be found in renting from condo owners who may not push their rents to market rate, over apartment communities that often attempt to get market rent. What are the most common mistakes that renters makes when searching for a new apartment? The biggest mistake renters make in searching for an apartment in a hot market like Denver is having too broad search criteria, thus missing out on apartments that meet their criteria, but are gone by the time they visit too many properties. Narrowing down search criteria should either be choosing a well-defined neighborhood, or choosing some other criteria, such as price and amenities. If a renter has a clear picture of what they are looking for, they can make a quicker decision to lock down a property that meets their criteria when they see it. Are the fastest growing cities a good place for renters? Why? The fastest growing cities in the country are generally not very good places to be a renter (or a buyer for that matter). This is because the development cycle in real estate takes a long time. Commercial apartment complexes take years to get approved, designed and built, and this often leads to a supply/demand imbalance that favors landlords. Using Denver as an example again, while supply of new apartment complexes has been steady over the past few years, rental prices have climbed steadily over the past decade, mostly due to the fact that the number of people moving to Denver has continued to be strong over that time period. Yearly average rental increases have been somewhere in the mid to high single digits over the past decade, with a few years in double digit territory. Unless this increase is coupled with significant income growth, people's share of their budget going to rent increases. The flip side to this is that these fast-growing cities have good job opportunities. Denver currently has the lowest unemployment rate in the US at 2.3%. And it's a great place to live, and so are places like San Francisco and San Diego. How can local policymakers make housing more affordable for renters without upsetting homeowners? Local policymakers could alleviate some of the pressure on rents by significantly increasing density allowances. Currently, many cities use antiquated zoning techniques to limit density very close to urban cores, and higher density would allow for increased supply without a lot of urban sprawl. This doesn't mean skyscrapers everywhere, but it does mean allowing duplexes and row houses where previously only single-family housing was allowed, and increasing other areas to allow mid-rise apartment buildings, similar to most European cities, who achieve very high density without a lot of skyscrapers outside the city core. Since many neighborhood homeowners don't want to see any change in their neighborhood, planners could focus on areas of redevelopment/reclamation first. This is what's happening in the RiNo district in Denver currently. However, former industrial areas like RiNo should have minimum density requirements, to ensure that buildings that are built today provide enough density to the city 50-100 years from now. In evaluating the best and worst cities for renters, what are the top 5 indicators? Looking at indicators such as percentage of median income spent on rent, trailing rent growth vs. trailing income growth, median rent vs. monthly mortgage payment for median house price, and average days on market for rentals all would provide some insight into how tight a market is, and how expensive rentals are relative to wages. Aaron Hedlund Assistant Professor of Economics at the University of Missouri What tips do you have for a person looking to get the best value in an apartment? Unlike owners, renters do not have any vested interest in ensuring that the property appreciates in value. Instead, renters should focus on finding an apartment that is in a suitable location, in good condition, and where the landlord is responsive. What are the most common mistakes that renters makes when searching for a new apartment? People searching for an apartment often neglect to read the fine print in the rental contracts. Some landlords cover more expenses than others, and how stringent landlords are with respect to tenants customizing their unit varies considerably. In some instances, the contract may even specify that part of the deposit will be used for customary cleaning and repairs when the tenant moves out. In addition to reviews about the landlord, these fine print details matter. Are the fastest growing cities a good place for renters? Why? The fastest growing cities tend to be the ones with the best job prospects, so in that sense, renters and homeowners alike are in a good position. However, rising housing costs are becoming an increasing problem, even in fast-growing Sunbelt cities that were previously known for their affordability. How can local policymakers make housing more affordable for renters without upsetting homeowners? What upsets homeowners most are policies that drive down the value of their properties. To a certain extent, any increase in the supply of housing will exert downward pressure, so some conflict is probably unavoidable. However, policymakers can emphasize the creation of low-density housing rather than high-rise units, which tend to be the biggest sore spot for owners. In evaluating the best and worst cities for renters, what are the top 5 indicators? I’d say that the top indicators of a good city for renters are a low unemployment rate, decent population growth, relatively stable average rents, a vacancy rate that is neither too high nor too low, and stable house price growth that isn’t too excessive. These are places that are likely to be thriving economically, and with housing conditions that are healthy, but not unsustainable.

Methodology

 

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