If you’re living in a major metropolitan area, chances are you think your rent is pretty brutal. Well, it’s time to batten down the hatches, because it could get even higher. A new study conducted by Apartment List predicts that rents in big cities are on track to significantly increase in the next couple years, and for an unlikely reason: job growth.
You’re probably thinking to yourself, “More jobs! That’s great!” And certainly it is, for unemployment rates. But there’s negative ramifications, as well. More jobs mean lots of people moving to cities to take advantage of professional opportunities. But unfortunately, there’s not enough new housing being built to keep up with the migration rates.
The Apartment List study compared the number of building permits for new construction to data on employment for metros and counties across the nation. The findings uncovered that there’s a strong correlation between the number of jobs per building permit and rent growth from 2005 to 2015. When these statistics were examined in relation to the amount of new construction in major US cities, it was determined that only 10 of the top 50 metropolitan areas in the US are producing enough new construction to keep up with job growth. That means in an already tight, post-recession housing market, finding a place to live will get even tougher.
To break down the situation, let’s make it clear why the housing market is already so tight. Consider these numbers from the study: The number of households in the U.S. increased by 11.2 million between 2005 and 2015. But during that same period, only about 9.9 million new housing units were made. And since a city should add one new unit for every one to two new jobs created, construction’s not keeping up with the necessary pace.
As for where in the US will housing lack the most in the next couple years, the Bay Area of California is set to be hit the worst. San Jose came in at number one on the list, with the biggest undersupply of new construction, as well as the fastest rent growth at 57%. In the number two slot is San Francisco, a city where real estate has become some of the most expensive in the US. The Boston area, already home to a serious housing crisis, claimed the number three spot. Salt Lake City, UT and San Antonio’s TX rounded out the top five.
“Cities that add jobs without also increasing their housing stocks quickly become unaffordable for all but the most well-off residents,” the study read. “As demand continues to rise, supply must respond accordingly or the current affordability crisis being experienced in many parts of the country will only be exacerbated.” And if you think about it, this is already proving to be true: In cities like San Francisco and Boston, which scored high on the list, it’s the low and middle income residents who are losing their grip on neighborhoods they previously could afford. And with less available property out there, whatever is left over is highly coveted, sending rental prices skyrocketing.
You can read more from the study on Apartment List.