Rising Incomes Multifamily Investors Shouldn’t Ignore
For much of the post-pandemic period, rent growth outpaced income growth, putting pressure on renters and introducing new risks for multifamily operators. Today, that dynamic is beginning to shift—and it may be an under-appreciated positive for long-term investors.
According to Zillow, nationwide rent growth slowed to 2.3% year-over-year in October, while median household incomes are estimated to have risen roughly 4%. GlobeSt notes this marks a reversal from the pandemic-era trend, when rents consistently climbed faster than wages and strained household budgets.
Affordability Is Stabilizing—Not Resetting
Despite the slowdown, affordability hasn’t returned to pre-COVID levels. The typical U.S. rent now stands at $1,949, up 35.6% from before the pandemic—well above the 26% rise in overall inflation. As a result, renters now spend about 27.2% of median income on rent, compared to 26.3% pre-pandemic.
Still, the direction matters. Incomes are finally catching up, helping stabilize renter balance sheets after years of compression.
Markets Where Renters Are Gaining Ground
Affordability improvements are most evident in markets where rents are declining. Austin, Denver, San Antonio, and Phoenix have all posted year-over-year rent decreases between 0.7% and 3.1%, while incomes continue to rise. Even in higher-cost markets like San Jose, stronger wage growth is helping renters keep pace despite ongoing rent increases.
These conditions are creating a more sustainable operating environment for well-located multifamily assets.
Where Pressure Remains
In 12 of the 50 largest U.S. metros, rents are still growing faster than incomes. This includes high-cost coastal markets such as New York and San Francisco, as well as Midwest cities like Chicago, Cleveland, and Milwaukee. In these areas, affordability remains strained—underscoring the importance of market and submarket selection.
Why This Shift Matters to Investors
Improving affordability doesn’t just benefit renters—it strengthens asset performance. When residents have more income left after paying rent, investors often see:
- Lower delinquency and bad debt
- Reduced turnover
- More predictable cash flow
- Greater operating stability
In many cases, modest rent growth paired with rising incomes produces better risk-adjusted returns than aggressive rent increases that stress tenants.
Looking Ahead
With additional multifamily supply delivering in many markets, rent growth may remain muted in the near term. While affordability challenges will persist in high-cost and slow-growth metros, the narrowing gap between rents and incomes suggests the sector is entering a more balanced phase.
For long-term multifamily investors, this quieter shift toward stability may prove to be one of the most important tailwinds of the next cycle.
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