In this piece, we will talk about the 25 most expensive cities in the U.S. to rent. For more cities, head on over to 5 Most Expensive U.S. Cities For Renters.
Real estate is one of the biggest and most lucrative industries on the planet. Diving straight into multiple market research reports, we can gauge just how valuable the real estate industry is. A research report from Allied Markets Research shows that the global real estate market was worth a whopping $28 trillion in 2021. As if this weren't enough, the research firm adds that from then until 2031, the sector will grow at a compounded annual growth rate (CAGR) of 5.3% to be worth an estimated $48.9 trillion by the end of the forecast period. A report from Grand View Research has more conservative revenue estimates for the industry. The report shares that in 2021 the sector was worth $3.69 trillion and will grow at a CAGR of 5.2% until 2030 to sit at an estimated $5.85 trillion worth. Within the industry, Asia Pacific is the fastest growing region as its rapid economic progress opens up the need for all types of buildings, both residential and commercial. Within Asia, China is the dominant player as it accounts for more than half of the market share.
As the real estate industry booms, rents are going up as well. The U.S., as well as other developed economies, are facing historic inflation these days which picked off last year. The Russian invasion of Ukraine came just when expansionary fiscal policies to counter the coronavirus pandemic's devastating impact on the economy were seeing their after effects in the market. Stimulus packages and historically low interest rates led to trillions of dollars of cash sloshing around the American economy. This led to more purchases and aggressive business spending. While all these are good for economic growth, they also lead to inflation, and the Russian invasion turbocharged this by also shaking up the global energy markets.
However, while the impact of high energy prices on inflation has started to come recede, rent continues to drive inflation up. According to the Department of Labor's report for inflation in March 2023, inflation was 5% in the month. However, for March, out of all the items that are used to calculate the inflation reading, shelter prices were among the fastest growth. Month over month, they rose at 0.6%, joining the costs of food away from home and medical care commodities.
Commenting on the growth in rent costs, the Labor Department stated:
The index for all items less food and energy rose 0.4 percent in March after rising 0.5 percent in February. The shelter index increased 0.6 percent over the month after rising 0.8 percent in February. The index for rent and the index for owners’ equivalent rent both rose 0.5 percent in March following larger increases in the previous month. The index for lodging away from home increased 2.7 percent in March.
The shelter index was the dominant factor in the monthly increase in the index for all items less food and energy.
Some of the largest real estate companies in the U.S., such as Prologis, Inc. (NYSE:PLD), Realty Income Corporation (NYSE:O), and AvalonBay Communities, Inc. (NYSE:AVB) are bathing in money. For instance, Prologis, the largest American real estate firm in terms of market capitalization, raked in $5.9 billion in revenue in 2022, marking a cool $1.2 billion growth over the previous year's results. Realty Income, a commercial property lessor, brought in $3.3 billion in revenue, for a $1.3 billion annual growth. And finally, AvalonBay, which owns apartment buildings, saw its revenue grow by $300 million in 2022.
As to what's happening in the rental market right now, management of AvalonBay shared more details during the firm's analyst earnings call for last year's fourth quarter, where they shared:
The output of our modes is a forecast of market rent growth of 3% during the year. In a year in which we will need to be prepared for a wider set of potential outcomes than usual, there are a number of attributes of our portfolio, and particularly our concentration in suburban coastal markets, that we expect to serve as a ballast in a potentially softening economic environment. As shown on slide 8, the cost of a median-priced home relative to median income in our markets continues to serve as a barrier to home ownership and support demand for our apartment communities. This is in addition to the repercussions of today's higher mortgage rates, which make the economics of renting significantly more attractive. The other side of the equation is supply.
In softening times, having an existing asset that is in direct competition with a recently built nearby project and lease-up can be particularly challenging. Our portfolio has some of the lowest levels of directly competitive new supply across the peer group at only 1.4% of stock, which we believe positions us well. And with that, I'll turn it to Kevin to detail our 2023 guidance.
With these details in mind, let's take a look at the most expensive cities in the U.S. for rent.
Photo by sean pollock on Unsplash
Our Methodology
To compile our list of the most expensive cities in the U.S. to rent, we used data from Zumper, an online portal that connects landlords with renters. We used the platform's data to find the top 25 US cities with the highest average rent for single bedroom apartments.
25. Tampa, Florida
Average Rent for a 1 Bedroom Apartment: $1,670
Tampa is a coastal city in Florida, which is the third most populous in the state. It has a diversified economy, made up of financial services, real estate, tourism, and healthcare.
24. Providence, Rhode Island
Average Rent for a 1 Bedroom Apartment: $1,700
Providence is the capital city of Rhode Island. It s also one of the oldest cities in the U.S., since it was founded in the 17th century and before the American Revolution.
23. Denver, Colorado
Average Rent for a 1 Bedroom Apartment: $1,710
Denver is the capital city of Colorado. It houses more than seven hundred thousand people, and its location makes it a transportation hub in the Western United States.
22. Nashville, Tennessee
Average Rent for a 1 Bedroom Apartment: $1,730
Nashville is the capital of Tennessee. It was set up soon after the American Revolution in 1779. The median household income was $46,171 in 2020.
21. Atlanta, Georgia
Average Rent for a 1 Bedroom Apartment: $1,750
Atlanta is the capital of Georgia. The city is one of the biggest economies in America, and it houses corporate giants such as Coca-Cola and Home Depot.
20. Long Beach, California
Average Rent for a 1 Bedroom Apartment: $1,800
Any list of the most expensive cities to rent in the U.S. would be incomplete without California, and marking the state's entry is Long Beach. The city is known for its busy seaport.
19. Chicago, Illinois
Average Rent for a 1 Bedroom Apartment: $1,800
Chicago is one of the most populous cities in the U.S. It houses close to three million people.
18. Scottsdale, Arizona
Average Rent for a 1 Bedroom Apartment: $1,820
Scottsdale is one of the smaller cities on our list, with a quarter of a million people living in its boundaries.
17. Charleston, South Carolina
Average Rent for a 1 Bedroom Apartment: $1,820
Charleston is the most populous city in South Carolina. It has a large shipping economy and was founded in 1670.
16. Urban Honolulu, Hawaii
Average Rent for a 1 Bedroom Apartment: $1,900
Urban Honolulu is a census designated area made up of Honolulu and other regions in Hawaii. Honolulu is known for its high cost of living due to reliance on imports.
15. Seattle, Washington
Average Rent for a 1 Bedroom Apartment: $1,980
Seattle is the most populous city in Washington and an economic hub with a strong presence of the technology industry.
14. Anaheim, California
Average Rent for a 1 Bedroom Apartment: $2,000
Anaheim is a Californian city known for its famous tourist attractions and resorts.
13. Fort Lauderdale, Florida
Average Rent for a 1 Bedroom Apartment: $2,100
Fort Lauderdale is a large Floridan coastal city. Healthcare and financial services firms are some of its largest employers.
12. Santa Ana, California
Average Rent for a 1 Bedroom Apartment: $2,110
Santa Ana is a populous Californian city and an economic hub within its region of Orange County. Healthcare firms are among its largest employers.
11. Oakland, California
Average Rent for a 1 Bedroom Apartment: $2,200
Oakland is one of the largest port cities in America and handles almost all of Northern California's port traffic.
10. Arlington County, Virginia
Average Rent for a 1 Bedroom Apartment: $2,270
Arlington County is the largest unincorporated region in the U.S. in terms of population. It is home to a variety of federal agencies such as the DEA and DARPA.
9. Washington, D.C.
Average Rent for a 1 Bedroom Apartment: $2,320
Washington D.C. is the capital city of America. Alongside having some of the highest rents in the U.S., it is also known for high living costs in general.
8. Los Angeles, California
Average Rent for a 1 Bedroom Apartment: $2,400
Los Angeles is an economic and cultural hub in California and one of the largest cities in America in terms of population.
7. San Diego, California
Average Rent for a 1 Bedroom Apartment: $2,400
San Diego is a coastal city in California and houses more than a million people.
6. San Jose, California
Average Rent for a 1 Bedroom Apartment: $2,600
San Jose is an economic hub in California and a technology hub not only for the city but also for the U.S. Naturally, this also makes it one of the expensive cities for renters.
Click to continue reading and see 5 Most Expensive US Cities For Renters.
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Disclosure: None.25 Most Expensive US Cities For Renters is originally published on Insider Monkey.
