Rental units in the Phoenix metro area remain affordable by big-city standards but rose 5.6 percent in the past year, reports Zillow. Some view rent pressures as another sign of the rich-poor divide.
Phoenix-area apartments and rental homes remain affordable compared to those in other big U.S. cities, but rate increases here are starting to rise faster than the national average.
Median rents in the Phoenix metro area climbed 5.6 percent over the 12 months through January, according to the Zillow Rent Index. That was higher than the 3.3-percent average hike in the 35 larger cities studied.
Phoenix rent increases also are exceeding U.S. inflation, which rose 0.8 in 2014.
Rising rents are seen as another factor contributing to the rich-poor gap. Renters are more likely to be young, underemployed, less-educated and “financially fragile,” according to a Finra Foundation study last fall. For example, 58 percent of renters in the survey said they would have trouble coming up with $2,000 within a month to meet a big expense like an unexpected car repair — double that for homeowners. Yet as homeownership has fallen, more people now find themselves renting — about 36 percent of households.
Rents in the Phoenix metro area average $1,225 a month compared to $1,350 for the large-city average tracked by Zillow. San Jose, heart of California’s Silicon Valley, had the highest average rents in January at $3,190 a month, Zillow reported. San Francisco, Los Angeles, New York and San Diego rounded out the top five.
Over the past year, rent increases have been especially large in Western cities, led by a surge of nearly 15 percent in San Francisco and more than 13 percent in San Jose. Other hot markets include Denver, Kansas City and Portland, Ore.
Zillow said personal incomes aren’t keeping up with the demand for rentals. As a rule, the company said, Americans should spend about 25 percent of their incomes on rent, but the current figure is closer to 30 percent. Rent affordability could remain a problem for at least another couple years, according to a Zillow survey of housing experts.
“Since 2000, rents have grown roughly twice as fast as wages,” said Zillow’s chief economist, Stan Humphries, in a statement. Many current renters are prospective homebuyers in the future, yet “rising and increasingly unaffordable rents make it difficult to save for a downpayment on a home,” he said.
More appartment construction and other new rental supply coming to market will help ease the affordability crunch, but that won’t happen overnight, Humphries said.
The weakest rental markets over the past year were Chicago and Minneapolis/St. Paul, where median rents dipped 0.5 percent and 0.3 percent, respectively, over the past 12 months.
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The cost to lease apartments and rental homes now is rising faster in the Phoenix metro area than nationally, according to a Zillow survey of 35 large cities. However, median rents here are still modest compared to many other big cities, especially in California. The rent increases shown below cover the 12 months ending in January.
|1||San Francisco||14.9 percent|
|2||San Jose, Calif.||13.4 percent|
|4||Kansas City||8.5 percent|
|5||Portland, Ore.||7.2 percent|
|1||San Jose, Calif.||$3,190|
Source: Zillow Rent Index