For renters, rent eats up a fair amount of their income. Where are fair market rents the highest? Where are they the lowest? If one is a real estate investor, the answer to this question could affect the value of one’s investment by thousands of dollars years down the line. Let’s look.
Fair Market Rent per Median Household Income
Before looking at the detail for the highest and lowest priced metropolitan statistical areas (MSAs), let’s look at the average across the country.
The first graphic below is the average fair market rent across the U.S. for rental units with 0 bedrooms, 1 bedroom, 2 bedrooms, 3 bedrooms, and 4 bedrooms. The figure covers the period from 2016 through estimated 2020.
Unsurprisingly, the larger the unit (the more the bedrooms), the more expensive the rental unit generally is. In 2020, a 4-bedroom unit cost, on average, 30.7% of the median renter’s income. A 3-bedroom unit came to 26.1%, while 2/1/0-bedroom units were 19.4%/15.9%/14.1%, respectively.
Average Rents Across MSAs
The next figure looks at average rent across MSAs. Unsurprisingly, the same general trend is present. In 2019, the average fair market rent for a 4-bedroom plat was $1,554. The comparable figures for 3-bedroom/2-bedroom/1-bedroom/0-bedroom units were $1,319/$981/$801/$712, respectively.
The Most Expensive and Least Expensive in the U.S.
With this background, where are the most expensive and least expensive places in the U.S. to rent?
Perhaps completely unsurprisingly, the most expensive rent area as reported by the Department of Housing and Urban Development (HUD) (Section 8 Rental Certificate Program) in 2020 will be San Jose-Sunnyvale-Santa Clara, California, with a rent of $3,943. Rounding out the top 5 are:
- Urban Honolulu, Hawaii at $3,116
- Santa Maria-Santa Barbara, California at $2,766
- Washington-Arlington-Alexandria, DC-VA-MD-WV at $2,215
- Sacramento-Roseville-Arden-Arcade, CA at $1,946.
- What About the Least Expensive? According to HUD’s Section 8 program, the least expensive MSA is Aguadilla-Isabela, Puerto Rico at $554 for a 3-bedroom plat. For MSAs within the continental U.S., the least expensive is Dothan, Alabama at $875.
Other less expensive mainland MSAs include:
- Youngstown-Warren-Boardman, OH-PA at $917
- Fort Smith, AR-OK at $950
- Jefferson City, MO at $967
- Florence, SC at $991
- Dalton, GA at $996
- Texarkana, TX-AR at $996
- Waterloo-Cedar Falls, IA at $996.
Overall, the wide variation in fair market rents present opportunities for the most savvy real estate investors.