USA National Rental Housing Affordability – 2014

Kwelia provides price-transparency for the apartment-rental industry. By analyzing millions of data-points, Kwelia can uncover the best deals available for renters, intelligently price apartments for property owners, and predict upcoming real-estate trends for investors.

At the beginning of the year we wrote about 2014’s most and least expensive metropolitan areas in the USA, explaining how Williston, ND had the most expensive rent in the country. From the media (as well as our data) we’ve long known the usual suspects when it comes to the priciest cities. However, we also knew anecdotally that median salaries tend to be higher in cities with higher costs of living. So while NYC and San Francisco rents are very expensive relative to most of the country, is it possible that when compared to the median income there the cities would not be such outliers? Which expensive cities are surprisingly affordable? Conversely, are there cheap cities with low enough median incomes that they are actually fairly unaffordable for their inhabitants? For this investigation, we pulled the data for 362 metropolitan areas (those with at least 2,000 observed rental listings), and used inflation-adjusted 2008-2013 ACS 5-year data for median household income.

image (2)

For a full list of all of the MSAs used, see this link for all of the data used in this article and more:
Google docs data

Not surprisingly, one can see a moderately positive correlation between the median household income in a metropolitan statistical area (MSA) and the median rent per square foot (exponential trendline with an R-squared value of .547). Creating this chart allows us to see that while median income and rent are correlated, there are some outlier MSAs in both directions: those with particularly low rent given their median incomes, and those with outsized rent relative to their median incomes.

image (3)

For example, looking at income vs. rent for the 15 most expensive and 15 least expensive MSAs, one can see that DC and LA have similar rents, but median income is much higher in DC. Additionally, although Key West, FL is in the top 15 most expensive MSAs, its median income isn’t that different from Branson, MO, which is in the list of the 15 cheapest MSAs.

Noticing these outliers, we wondered how many “expensive” MSAs might actually be affordable, and how many “cheap” MSAs might actually be quite unaffordable. To explore this idea, we set out to formalize the affordability of an MSA by creating an “affordability index” which is just the median income divided by the median price per square foot for an MSA. We then sorted all of the MSAs by this measure and compared their affordability relative to the median MSA (“the median MSA”, as it turns out, is actually roughly 12 MSAs with comparable income/rent ratios including Spokane, WA, Knoxville, TN, and Roanoke, VA.)

Least Affordable MSAs Multiple more expensive relative to the median MSA
1 Williston, ND 2.46
2 New York-Northern New Jersey-Long Island, NY-NJ-PA 2.46
3 Key West, FL 2.43
4 Santa Cruz-Watsonville, CA 2.02
5 San Francisco-Oakland-Fremont, CA 2.02
6 Honolulu, HI 1.96
7 Kahului-Wailuku, HI 1.95
8 Los Angeles-Long Beach-Santa Ana, CA 1.92
9 Boston-Cambridge-Quincy, MA-NH 1.87
10 Santa Barbara-Santa Maria-Goleta, CA 1.86
11 San Jose-Sunnyvale-Santa Clara, CA 1.79
12 Odessa, TX 1.74
13 Miami-Fort Lauderdale-Pompano Beach, FL 1.69
14 San Diego-Carlsbad-San Marcos, CA 1.68
15 Pullman, WA 1.65

How then should the multiplier in the right column of the chart above be interpreted? Take the San Francisco area as an example. It has an affordability multiplier of 2.02, meaning that it is 2.02 times as expensive as the median metro area. What does this mean? Given the median income in the SF area, and the median rent there, one could only purchase (1 / 2.02) times = 49.5% as much apartment space as someone in, say, Spokane, WA (a median MSA) making the median wage.

As it turns out, the list of the top 15 least affordable MSAs is very similar to the list of the top 15 most expensive MSAs. Pullman, WA, however, shows up as an outlier–while rent in Pullman is only $.90/sqft, the median household income in Pullman is roughly $37,000, making it curiously unaffordable for many residents. Additionally, the Washington D.C. area did not make the list of least affordable MSAs. Although it had a median rent of $1.84/sqft, it also has a median household income of nearly $98k, making it actually fairly affordable: DC’s affordability multiplier of .78 (78% as expensive as the median metro) is the same as Pittsburgh, PA.

Most Affordable MSAs Multiple cheaper relative to the median MSA
1 Appleton, WI 0.68
2 Warner Robins, GA 0.71
3 Idaho Falls, ID 0.73
4 Wausau, WI 0.74
5 Huntsville, AL 0.75
6 Lexington Park, MD 0.77
7 Green Bay, WI 0.79
8 Oshkosh-Neenah, WI 0.79
9 Enterprise-Ozark, AL 0.81
10 Bloomington-Normal, IL 0.81
11 Fort Wayne, IN 0.82
12 Gainesville, GA 0.82
13 Ogden-Clearfield, UT 0.82
14 Bay City, MI 0.83
15 Killeen-Temple-Fort Hood, TX 0.83

The most affordable MSAs, however, are much more different from the list of least expensive MSAs. They are much more Midwestern (and less Southern), with almost a third (4/15) in Wisconsin alone. Nearly all of them have median incomes of roughly $50k-$70k, with one exception: Lexington Park, MD, median income–$93k. Although Lexington Park, MD has a very high median income, median rent is only $1.05, making it one of the most affordable places in the USA.

There’s more to affordability than rent and income, but the above provides a rough sketch of which parts of the country are more or less affordable, at least from a rental perspective. With so much national data, expect us to continue to surface insights on different facets of the rental market both locally and on a national scale.

If you’d like to learn more about Kwelia, sign up for our mailing list or log in to find the best apartment deals around you.


Austin Apartment Deals: A Renter’s Cheatsheet

Kwelia provides price-transparency for the apartment-rental industry. By analyzing millions of data-points, Kwelia can uncover the best deals available for renters, intelligently price apartments for property owners, and predict upcoming real-estate trends for investors.


In our last posting, we reviewed Austin’s top apartment deals. Unfortunately (for renters) many of last week’s deals are no longer available, giving testament to Austin’s highly desired real estate market; In 2013, Austin showed above a 95% occupancy rate for apartments,  leaving little room for future renters. Fortunately, Kwelia is here to save the day with yet another iteration on this week’s top  apartment deals in the Austin area.


If you’re a renter who prefers a quieter, more homely (the “cozy” definition, not the “unattractive” one) neighborhood, check out Sabina properties, located in North Austin’s Hancock area. Sabina offers a 2-bedroom, 2-bath, 1,080 square foot apartment with monthly payments of $1,950; Sabina throws in a free month’s rent, reducing the renters’ overall monthly payments to $1,787/month. As a result, Kwelia ranks the Sabina a cool 85/100.

Why this deal wins

Not only does Sabina offer a quiet, safe neighborhood but the apartment comes furnished with luxury granite countertops, stainless-steel appliances and in-unit washer & dryer. Access to an elevator makes moving-in easy to the newly renovated apartments. Additional value is derived from Sabina’s 1-month free promotion when you sign the lease.


Berkshire SoCo

If you’re not a fan of the north, head south and check out Berkshire SoCo. Berkshire is currently offering a 1,221 square foot, 2-bedroom, 2-bath luxury apartment for $1,694/month. Berkshire’s offering has been rated a 65/100 by Kwelia’s algorithms.

Why this deal wins

While Berkshire SoCo is not as highly ranked as Sabina, the property offers a huge advantage – a garage. With a car, a renter will still need to drive 16 minutes into town but will have the flexibility for weekend getaways and explore the beautiful, more rural parts of Texas.


Falcon Ridge

If you enjoy Berkshire SoCo’s location, you might want to also check out Falcon Ridge – a 2 minute drive further south. The additional 2-minute drive will yield a 1,120 square foot apartments with 2-bedroom and 2 bathrooms priced at $1,266 (after 1-free month lease signing). The deal offered at Falcon Ridge is almost too good to pass up, scoring a Kwelia rating of 74/100.

Why this deal wins

Not only does Falcon Ridge offer luxury apartments with elevators for easy move-in, but Falcon Ridge offers many outdoor activities including, but not limited to, access to Williamson Creek, a volleyball court, two swimming pools, jogging trains, and public BBQ grills – perfect for some fun in the sun!

Coming up next week…

Grab these apartments while you still can because, like our last posting, most apartments are only on the market for a week! None the less, the team at Kwelia will be your eyes-and-ears keeping you up-to-date on the best apartment deals within the area.

If you’d like to learn more about Kwelia, sign up for our mailing list or login to find other apartment deals throughout the area.


Austin Apartment Deals:  A Renter’s Cheatsheet

Austin’s growing population has made finding great apartment deals near impossible. We’ve analyzed data and are delivering the Top Austin Apartment deals available right now.

Ranked the fastest growing U.S. city for the fourth year in a row, Austin, Texas’s landscape has changed drastically. Throughout the city, engineering and property companies are scrambling to construct enough housing to host the burgeoning population. Unfortunately, for Texan immigrants, property developers are struggling to keep up with demand.  Naturally, this has resulted in higher rental prices.  For renters like us, finding a good apartment deal is about as rare as a short line at Franklin’s BBQ.

Fortunately, at Kwelia we’ve spent the past couple of years building technology to help analyze and decipher rental housing markets. Among other cool things, our tech continuously scores every apartment on the market to signify how good of a deal it is (the higher the score, the better the deal and vice versa).  Needless to say, we have a good sense of where the rental market is at any point in time.

While we’re accomplishing this using tons of data and really complex algorithms (stay tuned for a future post on this), our goal is to keep things simple and to be as helpful as we can to us renters out here.  With this in mind, we’ve put together a short list of some of the Top Apartment Deals throughout Austin for the week.  Like you, we hate things like spam, or fake listings, so know that as of January 26th, 2015, these were all available and for the taking.  Have at it, ya’ll!

Downtown  –

Austin’s traffic is amongst the worst in the United States, even beating out San Francisco & New York City for the number 2 spot in 2013. As a result, living downtown in the thick of the social and professional mix of things offers huge advantages. Our top pick for the best deal in downtown Austin is located at Gables Park Plaza’s 1 Bedroom, 1 Bath, A3A unit going for $1,730.

gables park plaza table

Why This Deal Wins

As for why this is a such a strong dgables park plaza grapheal, there’s a ton of new construction in this area.  For example, this building is directly in front of the Gables Park Tower building, which was finished last year.  Naturally, these command a premium because they’re brand new (limited wear-n-tear) and are built with the most in-demand amenities.  As such, it follows that there are good deals to be had in the not-so-brand-spanking-new buildings in the area like this one.

In addition to Kwelia’s positive rating (72/100), Gables Park Plaza offers a tremendous location in the heart of Austin with efficient floor plans that help maximize the interior space.  If there is a knock on the unit, it’s proximate to the train tracks that sit behind the building.  However, once compared to other similar floor plans in neighboring complexes, the price/layout/location mix can’t be beat.  This is a deal that certainly won’t be on the market for long.

South Lamar – Recent Construction

For those who prefer to be away from the hustle-and-bustle of downtown, there is great opportunity just south in what’s called the South Lamar area.  In a lot of ways, this is the best of both worlds given its close proximity to the SoCo and South 1st districts, lower density, and access to downtown.  Our top pick for the best deal here is at The Hamilton.  Known for its scenic location, The Hamilton has a 1 bedroom, 1 bath, 800 square foot apartment for rent priced at $1,010 per month. Amenities include elevators and granite countertops, resulting in a Kwelia Health Score of 77/100.

hamilton table

Why This Deal Wins

To understand why this is a good deal, it’s necessary to compare it with some surrounding properties.  Most around it hhamilton chartave Kwelia Ratings lower than the 50s (in the 20s in some cases).  According to our data-driven insights, we’ve determined that granite is a major driver of rent around here.  While this can be interpreted in many ways, one obvious interpretation is that this area is dominated by older construction that doesn’t feature trendy amenities like granite.   to put this in comparison, the surrounding properties rankings rank from 20 to 58 out of 100 and typically have less living space.

South Lamar – New Construction

As alluded to earlier, some of the best deals in town will be recently-constructed properties around a bunch of brand new construction.  In a similar vein, there are good deals to be found in some off-peak (read: not in downtown) new construction properties.  Often, these will be in lease-up mode (seeking initial tenants after property is built) and their management companies want them filled – ASAP.  Some want them filled so badly they’ll offer specials to entice renters.  As a case in point, our next deal is at the Cielo, which is again in South Lamar.  Check out the 1 bedroom, 1 bath (A2 plan) located at Cielo.  Now, although the sticker reads that these are $1435/mo, the price comes down to $1315 after the one-month-free special.

cielo table

Why This Deal Wins

Cielo’s current offering stands out amongst the surrounding properties. Not only does Cielo offer a tremendous price per square foot withicielo graphn the area, but the luxury apartment is also equipped with granite countertops and on-site elevators. However, perhaps one of the biggest selling points is Cielo’s 1-month free incentive; this reduces the overall rent by 8% and further increases this apartment’s great value. As a result, Kwelia ranks Cielo’s apartment a cool 70/100.

Coming up next Week….

Next week we’ll be covering the north area of Austin, delivering you the best, most recent deals that hit our radar. If you’re interested in staying up-to-date on the best real-estate prices feel free to join our mailing list.

Interested in seeing how your rent stacks up to your neighbors or looking to move soon? Sign-in to Kwelia and get the dirt on whether you’re paying the best price possible!

Note: Kwelia continuously acquires new data on a daily basis, giving you the most up-to-date overview on current apartment prices. Due to Kwelia’s daily updates, some of the Kwelia Scores mentioned may have changed. To see the latest Kwelia Scores, please sign-in.”


2014’s Most and Least Expensive Metros

As our growing database continues to reinforce, real estate is inherently local. Reflecting this notion, many of our previous posts revolve around analyses within cities. Whether comparing rental price trends to the Case-Shiller 20-city index or mapping out rental affordability, we’ve primarily focused on market-level data for our posts. Recently, however, our curiosity has led us to dig into broader questions on a national level. How do different cities, or even regions, compare on a variety of features? We have barely begun to showcase the geographical breadth of our data–until now.

The Kwelia rental database includes hundreds of metropolitan statistical areas (MSAs) nationwide, enabling us to provide insights into nearly every rental market in the United States. When taken together, that range allows us a uniquely macroscopic view of the national rental market. Although there are many dimensions (such as amenity composition, rental descriptions, unit types, etc.) on which we can compare different metros, we will save those for future discussions.  For this post, we’ll focus on one high-level characteristic: price. Here, we consider prices as the median USD per square foot for a metropolitan area. Without further ado, the most expensive metro areas in the United States for 2014:

Most Expensive Metro Areas in the USA 2014

Most Expensive Metro Areas in the USA 2014

Riding the wave of the oil boom in the Bakken shale formation, Williston, ND catapulted to the top of the list of most expensive metropolitan areas in 2014. At $2.74/sqftmedian rent, it is a full $.16/sqft more expensive than the New York metropolitan area ($2.58/sqft) and the San Jose-Sunnyvale-Santa Clara area (also $2.58/sqft). The surging demand for oil workers to tap the Bakken shale and a scant supply of people (mostly men) willing to endure the hard work, grueling hours, and remote location sent median wages Williston, ND soaring north of $75,000. High disposable income coupled with a limited supply of housing subsequently pushed median rents to the impressive level observed. Nevertheless, whether the market there can sustain those rents in the face of new apartment construction and tanking oil prices remains to be seen in 2015.

Least Expensive Metro Areas in the USA 2014

Least Expensive Metro Areas in the USA 2014

Among the rest of the most expensive metropolitan areas are few surprises, with the New York area and Silicon Valley rounding out the top four. Honolulu, HI cracked the top five with a median rent of $2.27/sqft. Notably, with the exception of Williston, ND, all of the top 15 most expensive metro areas are coastal (or in the case of Hawaii, an island).

Unlike the most expensive group, the least expensive MSAs are predominantly Southern/Midwestern and landlocked. Albany, GA (home of Ray Charles, Deion Branch, and Paula Deen, among others) had by far the cheapest median rent ($.50/sqft) of any metro area in the United States. However, with inflation-adjusted median income at just under $40,000 and unemployment above the national average, it also wasn’t the most well-off.

Taking the above example, “most expensive” isn’t necessarily synonymous with “least affordable”, and vice-versa. One’s purchasing power varies with real income, so an analysis of which MSAs are the most affordable requires consideration of real income (and typically also the price of a fixed basket of goods, which would include more than just rent).

Which metro areas are the most and least affordable? Check back soon for the next blog post in our ongoing exploration of the national rental market.


Does “Apartment Chopping” Make Sense?

I just read a thought-provoking article over at The Brooklyn Reader reporting that across Brooklyn property managers are chopping up existing apartments to add additional bedrooms. The basic logic of this makes sense–the more renters an apartment can support, the more potential income to be spent on increasing rents. However, the apartment will also become more cramped and less valuable on a “per renter” basis.

Naturally, I wanted to take a more data-driven look at this. I decided to use Bed Stuy as a case study, since it was one of the neighborhoods mentioned in The Brooklyn Reader’s article. Here are some median rent statistics for Bed Stuy in the last 60 days taken from our Competitive Intelligence product (click to enlarge):


The spread in rent between one and two bedroom apartments in Bed Stuy is currently at $305 dollars. So, it seems at first glance that if you can inexpensively add a bedroom to an existing one bedroom, you should definitely do so. But, number of bedrooms is not the entire story in terms of apartment value. One bedroom apartments are more attractive to renters, at least in terms of what the market signals in terms of rent per square foot: $2.12 for one bedrooms vs. $2.00 for two bedrooms. So, you can expect to lose around 5.6% in per square foot value after converting a one bedroom to a two bedroom apartment in Bed Stuy, since the total number of square feet is not going to change.

Furthermore, the converted two bedroom is likely to have to closer to 800 sqft (the one bedroom median) than 1,000 sqft (the two bedroom median) since, after all, it used to be a one bedroom. Let’s split the difference and assume it’s a bigger one bedroom at 900 sqft.: that’s still 10% less than the median two bedroom, so we’re not going to end up with a full-sized two bedroom apartment.

Taking those adjustments into consideration, we can expect the actual increase in value to be much lower: $1,924 – (5.6% of $1,924) – (10% of the previous result) = ~$1,645. That’s only $26 more than the one bedroom average, and almost certainly not worth the cost of the conversion.

This is obviously a simplistic analysis, but I was skeptical that you could take an existing apartment that’s presumably been designed for a certain number of occupants, shoe-horn in an extra bedroom and get something substantially more valuable. The basic reason for this is that it does not take into account the fact that you’re not really adding value from the renter’s perspective, and what the renter is willing to pay for an apartment is all that really matters. You’d be better off adding nicer finishes, which do add a lot of incremental value (but that’s another post.)

This analysis is also specific to Bed Stuy, and it may actually make sense in other areas where the numbers look different–say where two bedroom apartments have a higher or similar per square foot value than one bedroom apartments, or where the difference in size between typical one and two bedrooms isn’t so pronounced.

If you want to dig deeper into this kind of data & analysis, check out the free trial of our Competitive Intelligence product!



Why the Zillow-Trulia Merger Is Meaningless for Real Estate Innovation

The NY Times (and others) are reporting today that Zillow is going to acquire Trulia for $3.5 billion in stock. This is a massive merger that will no doubt effect massive change in the real estate media landscape. This news is not surprising given Zillow CEO Spencer Rascoff’s goal of “[creating] a portfolio of real estate properties, becoming more along the lines of an IAC/InterActiveCorp.”

The comparison to a media holding company such as IAC is a good one. Zillow’s primary innovation has been to bring real estate marketing online. Now, their path to future growth is to get more eyeballs on their content via acquisition.

And by all accounts, the new Zillow has a healthy market opportunity in front of it:

“The revenue of the merged company — $341.2 million last year – represents only a small part of what he [Rascoff] reckons is the $12 billion the real estate industry spends on marketing each year.”

However, this isn’t going to do much to affect the way actual real estate business is conducted.

Zillow is a real estate marketing company, but the real estate industry is not primarily a marketing business. Zillow may be content to own this niche, but there are much bigger opportunities out there to innovate in real estate.

Property management is a $69 billion annual business in the US alone. A big chunk of what property managers do could be conducted online, but currently isn’t.

Real estate development and investment is a order of magnitude larger than that, and is vastly under-served by the incumbent software and data offerings.

And yet, relatively few startups have attempted to serve these markets.

At Kwelia, we’re excited to capitalize on Zillow’s missed opportunity. We’re building the data platform that powers true innovation in real estate, and we’re starting with rental housing data. If you’re ready to join the next wave of real estate innovators building on our platform, drop us a line.


The Best Times to Rent: Apartment Dynamic Pricing Patterns

“You should always buy plane tickets on Tuesdays,” my friend tells me.

Or was it strictly business hours in the first half of the week? Conventional wisdom abounds on the ideal times to purchase a flight, as consumers have long known that airline prices tend to change from day today and sometimes even more quickly. Airlines are hardly alone in employing these tactics though; many e-commerce sites also use dynamic pricing to respond to fluctuations in demand by adjusting prices algorithmically.

Should you always buy plane tickets on Tuesdays? As a result of these dynamic pricing methods, some services have leveraged their data to help consumers pick good times to buy (Kayak and Bing, for example, try to forecast flight price movements in part using query volume.)

Is there a best time to rent an apartment? At the end of last month, an article from Time Magazine examined how apartment prices, too, can change rapidly. Take a look at the infographic below, and read on to find out when you’re more likely to find an apartment deal:


First, how prevalent is dynamic pricing in the apartment industry? Estimates suggest that roughly 20% of apartments nationwide use some form of revenue management software to adjust prices. Upon examining the relationship between apartment pricing and time from a sample of more than 1.5 million listings selected from our national database, we found some patterns.

Much like airline tickets, there are ideal days to find an apartment — while Sunday and Tuesday were the most expensive days, Monday and Friday were the least expensive. Furthermore, the time of the month makes a difference. Prices rose throughout each month by about .4% total, with the majority of that increase occurring between the first and second weeks of each month. Similarly, there are more and less expensive months in which to rent. We found that prices are lowest in January, rise consistently until August, and hold steady through the end of the year. At their summer peak, prices were nearly 4% higher than in January.

So when should you rent? If you can afford to be flexible on timing, look for listings around the beginning of the new year. In general, stick to the first week of the month, and preferably look on a Monday or on a Friday. Of course, you can also always sign up for our free apartment ratings tool to find great deals using our statistical models. Happy hunting!


The “Housing Affordability Crisis”: Affordable Low-Income Rentals Without Federal Assistance?

Recently there has been some discussion of rental affordability and the increasing share of income that American households pay for rental units. Back in January, we examined rent as a share of income in adding that data as well as income data to our maps. Since then, some have discussed the particular hardships faced by low income renters, such as in a wonderful interactive map and report by The Urban Institute on the evolving housing availability landscape for extremely low-income (ELI) households. The bleak housing outlook for low-income households has led some to theorize on the culprit of the “housing affordability crisis.” Some argue that the supply of apartment units has simply not kept pace with the trend of Americans increasingly choosing to rent, causing low income renters to spend increasingly large portions of their income on housing. Meanwhile, Next City, in an interesting analysis of the Philadelphia market, concludes that poor housing affordability in Philadelphia is a symptom of low income rather than of insufficient rental supply.

As we do not gather public housing or Section 8 information, we can’t and won’t speculate on the causes or the magnitude of a dearth of low-income housing. That said, it is clear that households are paying a more sizeable fraction of income toward housing than in previous years, and that finding a rental for less than 30% of income is increasingly challenging. Given that we have a large database of rental listings, we decided to investigate the following: all things being equal, how difficult would it be for an extremely low-income household to find an affordable rental without federal assistance?

To answer this question, we first have to set out the assumptions we are making:

  • Households are four-person households as in The Urban Institute study.
  • The per-county ELI cutoff levels for household income are the same 2012 values used by The Urban Institute.
  • Rent above 30% of annual income is considered burdensome, as commonly defined.
  • Given a household of four, it was assumed that any unit needed at least 2 bedrooms.
  • Lastly, assuming “all things being equal”: it is possible that market-clearing prices would change if federal assistance did not exist.

Above: The ELI cutoffs for a four-person household in various counties around the U.S.

Given these assumptions, we set out to find just how many listings in a county could satisfy our criteria. For each county under consideration, we looked at listings from the past three months where the listings satisfied the price and bedroom parameters set out above. We then compared the number of these listings to the number of ELI renter households in the respective county to find the ratio of ELI listings to ELI renter households.

Above: The maximum monthly rent a four-person ELI household could pay to not exceed 30% of income by county.

As it turns out, these rentals are indeed very rare. In all 16 counties we examined, none of the counties had more than 1000 such units. Furthermore, the proportion of the number of these cheap listings to the number of ELI renter households did not exceed 1% in any of the 16 counties under consideration

.Screen Shot 2014-03-26 at 6.15.41 PM.png

Incidentally, the proportion of listings to ELI renter households appears to buttress Next City’s determination that Philadelphia’s problem rests with income more than with rental supply, as Philadelphia has more than twice the proportion of ELI rentals compared to comparable cities (again, this is strictly private housing and does not include Section 8). According to The Urban Institute, of the top 100 counties in the U.S., Suffolk County (Boston) had the smallest gap between the number of affordable listings and the number of ELI renter households. Why then is the gap larger in our data? The Urban Institute figure includes federal housing assistance, which ours does not. Thus, once again, these figures on affordable listings should be understood with the knowledge that the presence of federal housing assistance can vastly affect the number of affordable units. Nonetheless, it is interesting to see how scarce many of these units on the low end of the market would be relative to the number of households potentially looking to rent them if there were no federal assistance.


Markers of Gentrification: Mapping Rent as a Share of Income

Our Kwelia heat maps have been a great way to visualize rental prices with a detailed, city-wide view of median prices per square foot, and today the maps are getting additional features. Now, in addition to the median price per square foot overlay, you can explore every rental market by median income as well as by median rent as a percentage of median income. Simply toggle the “switch layers” button on the bottom left portion of the map and select your desired data layer to look around.

Where does the data come from, and what are these metrics?

Edit: An earlier version of our maps did not contain proper attribution for OpenStreetMap contributors. We apologize for this oversight and have updated our maps accordingly.

Both layers use median household income data from the 2012 5-year American Community Survey for the median income. The median rent / median income layer provides a quick glance into the affordability of an area. While not the same as the share of income paid by renters, our median rent-to-median income ratio indicates what percentage of their income the average person in that neighborhood would have to pay to rent the average apartment in that neighborhood. In other words, while the share of income paid by renters will stay bounded between 0-100%, it is quite possible (and does happen) that the median rent-to-median income ratio exceeds 100%. This could potentially happen for a variety of factors, including: multiple people splitting rent for an expensive apartment, time lags between the older income data and the up-to-date Kwelia rental data, or simply too few rental price observations in a neighborhood to provide an accurate median rental rate.

Median rent over median income is most useful for relative comparisons, so to provide some explanation for what “30% of income” means, we have also provided median income data in the info hover panels as well as a separate median income map layer to contextualize the rent share of income data.

Finding hot neighborhoods with rent as a share of income:

While we initially mapped the ratio of rent to income to see how this metric varied within and across cities, we found that it unexpectedly gave us a view into another category: neighborhoods with rapidly increasing rents. Because of the time lag between the 2012 5-year ACS income data and the real-time Kwelia rental data, the ratio of rent-to-income in neighborhoods with rapidly increasing rents is outsized relative to other neighborhoods. We’ve collected some examples of hot neighborhoods from cities across the United States below. Does the median rental share of income in your city highlight up-and-coming neighborhoods too?

San Francisco


New York




Las Vegas






Los Angeles





Kwelia Rent Price Trends vs. The Case-Shiller Home Price Index


As Hamlet probably said while perusing Danish real estate: “to rent, or not to rent, that is the question.” Prospective renters (or homeowners) can attest that the decision to buy or to rent involves a complex consideration of a number of factors, including the time horizon for the living arrangement, expected changes in rental and home prices, and mortgage rates (fortunately, both the New York Times and Trulia conveniently provide tools to assist with some of the math). While the market dynamics and personal factors that inform the decision to buy or to rent are complex, we’d like to briefly explore one of the factors mentioned above: the evolution in rental and home prices, and then investigate the relationship between the two.


In order to compare home prices and rental prices, we first need yardsticks for both. For home prices, we used the 20-city indices from the Case-Shiller 20-city composite index, and for rental prices we used our Kwelia data (of course), as well as some nationwide Consumer Price Index (CPI) data for rent of primary residence.

The Case-Shiller Index–Useful for Tracking Home Values

As mentioned last time in our piece about correlations between search interest and rental prices, the Case-Shiller index provides a benchmark measurement for home values in the U.S. There are multiple indices, including the national index (using quarterly single family home values), and the 20 and 10-city composite indices (as well as an index for each of the 20 cities), using monthly home values. The indices use a “repeat-sales” methodology by including homes that have sold at least twice in order to quantify an appreciation in value. Lastly, the Case-Shiller methodology involves measuring changes in price while keeping quality constant, i.e., ignoring physical changes to homes in order to measure the real appreciation in price (for example, a home increasing in price by 20% because an addition was added is not the same as a home gaining 20% in value with no improvements).

Not quite apples-to-apples…apples-to-pears?

For the rental data, we used a monthly average of the weekly median rental prices in the same 20 cities as the Case-Shiller data. However, it should be noted that while the Case-Shiller home price index provides a “real” (i.e., constant quality) measure of housing prices from month to month, the rental data is not quality adjusted. That said, the duration of the comparison for each city is generally one to two years, over which period the impact of quality changes in rental stock should be relatively minor on a city-wide basis.

Are Home Prices and Rental Rates Related?

Note: while others have written in detail about prices and rents, this exploration should be treated as more of a “lab-exercise” to illustrate an effect empirically rather than as a formal study.

The hypothesis (“Here be Economics”)

Purchasing a house or an apartment instead of renting can be a more economical choice depending on the time horizon under consideration. For a very short timespan, it is often cheaper to rent, but for longer timeframes there is a breakeven point (at which you would be indifferent between buying and renting) after which it is cheaper to have purchased the house or apartment rather than renting. For example, it might take a decade for a house to become the cheaper option compared to renting for the same period of time. How long it takes to reach this breakeven point depends on the conditions of the market, including tax rates, interest rates, expected capital returns, the risk premium in the housing market, etc. For instance, low interest rates make ownership more attractive, while a risky housing market and high interest rates incentivize renting instead of purchasing.

Are rental rates and prices related in theory? In a classical frictionless market, the total cost of ownership for a house is comparable to an equivalent rental rate. This is called the owner’s equivalent rent, or the amount which an owner would pay in a competitive rental market to rent his own home. Any home has an associated hypothetical rental value, and any rental has an associated hypothetical purchase value. As such, in a competitive market in the long run, the discounted returns to renting an apartment should be equivalent to the total purchase value.

Therefore, we would hypothesize that rental values and home values are positively correlated (i.e., the two would move in the same direction in general). If rental rates and prices were to deviate too much, then arbitrage opportunities would act to bring the two closer together. For example, if rental rates were very high and housing were very cheap, then one could take advantage of this price difference by buying a house and renting it out. This would have the effect of: 1) Increasing the supply of rentals, bringing down rental rates and 2) Decreasing the supply of houses, increasing the price of purchasing a home. The opposite would also hold true.

However, because there are frictions in the market and buying and selling is expensive, one would not expect complete arbitrage (i.e., price differences would persist). Furthermore, although rental rates and prices are related in theory, there are other independent factors in both the rental and housing markets that determine prices for each. Because of this, we would expect only a moderate positive correlation on average in the long run. Does the data bear this prediction out?

The Results


Correlation between monthly Kwelia rent values and Case-Shiller index (r)















San Diego








San Francisco




Los Angeles
















Las Vegas




































New York




From a quick look, we can observe that 15 out of 20 of the cities showed a positive correlation between rental rates and home values. However, by looking at the t-values to determine which of these correlations is significant, we can eliminate the bottom 5 cities (whose correlations are not statistically significant), leaving us with 13 out of 15 correlations both positive and statistically significant. Excellent. Not only are the majority of the correlations positive and significant, but most of them have r-squared values above .6, indicating that a significant amount of the variation in the data is accounted for in the model.

But what about Charlotte and Minneapolis, which both have statistically significant and negative correlations? We thought about this for a while (and welcome any ideas!), and after investigating a few hypotheses, have settled on one theory for now: it’s an accident. The timeframe for the data used in both of those cities is just under a year, which is necessarily a short-run analysis. If rental rates and home values were to drift apart over the course of a year, the market wouldn’t have time to take advantage of the price difference and bring them closer together.

Ok, that sounds fine in theory, but data talks–does this long-term positive correlation between rents and home prices exist? To find out, we compared the 10 and 20-city Case-Shiller composite indices against the Consumer Price Index data for rent of primary residence (which is a real-valued index), from January 1st 2000 until now. Unfortunately, the CPI is not segregated by metropolitan area, but rather an index of national rental values. Nevertheless, as most rentals are in cities, we compared the CPI to the 20 and 10-city composite indices rather than the national Case-Shiller index to get the most fair comparison.

Although one can clearly see the explosion (and subsequent bust) in home values surrounding the mortgage crisis, there is as predicted a moderate (r~.3), statistically significant (t~4), positive correlation between rental values and home values over a long duration. This helps add evidence to our theory that the observed negative correlations were essentially an artifact of the short-run analysis, and that given sufficient long term data, a positive correlation would prevail as prices adjust.

The trend in Denver was positive as well.

Concluding Thoughts

While the evidence from this little experiment suggests that rents and prices are in fact positively correlated, it’s important to remember not to overstate the significance of the result. First, as noted above, the lack of a city by city “real-valued” rental index makes one-to-one comparisons with the Case-Shiller index difficult. Furthermore, the limited timeframe under consideration also prevents one from drawing too strong of a conclusion. Lastly, it is worth mentioning once more that the determinants of prices in both markets are diverse, and that the correlations found here serve more as an illustration of a specific connection between rentals and homes, rather than indicating a strong causal effect in determining prices.

That said, it is still interesting to “verify” these theoretical relationships with some actual data. Those interested in seeing the graphs for the remaining 18 cities can see them below, and those curious should check out some relevant papers at the end of this post. Finally, the scope and depth of our data is constantly growing, so we hope to provide even more robust analyses in the future!



San Francisco 

San Diego



Los Angeles

Las Vegas









New York


Appendix for the curious

Outside Data Sources:

Case-Shiller data:


Rent CPI data:


Relevant Literature:

“The Long-Run Relationship Between House Prices and Rents,” Joshua Gallin.


“Run-up in the House Price-Rent Ratio: How Much Can Be Explained by Fundamentals?,” Kamila Sommer, et al.