Across much of the U.S., the cost to rent a house or apartment in the suburbs is doing something it hasn’t in four years: Rise faster than the rent for a downtown residence.
That’s according to a study from Zillow last week that crunched the numbers for major cities in the U.S. Nationwide, the average rent for a downtown residence was up 2.3 percent compared to the same time last year, while the rent for a house or apartment in the suburbs climbed 2.5 percent.
That might not sound like a big difference, but consider this: Last year, urban rents were spiking 5 percent compared to 2015, while suburban rents were rising 3 percent. The difference is even more pronounced in some individual markets. In white-hot San Francisco, urban rents fell 0.4 percent compared to last year, while rent in the suburbs rose 2.6 percent. In Nashville, the cost for an urban rental rose 1.7 percent, while suburban rents jumped 5 percent.
But that’s not the case in Charlotte, which is bucking the national trend. Urban rents in Charlotte are up 5.7 percent compared to last year, while rent in the city’s suburban submarket climbed 3.5 percent.
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Here’s what’s driving the trend in much of the U.S. Downtown rentals have gotten so expensive they’re pricing many tenants out, while the big supply of new units is starting to pull down prices, according to Zillow. At the same time, there’s less new inventory in the suburbs, where more people are looking to move for bigger space and lower rents, thus driving up demand.
“Because walkable urban centers close to amenities are typically a big draw for renters, you’d expect rents to rise faster in the city than in the suburbs – which is exactly what we’ve been seeing until very recently,” said Zillow Chief Economist Dr. Svenja Gudell, in a statement. “Rents themselves are still lower in the suburbs, but if demand keeps growing for suburban rentals and supply continues to lag, that will also start to change. As more formerly urban renters move to the suburbs in coming years, we’ll likely start seeing more apartment buildings and walkable amenities popping up in those communities.”
In Charlotte, uptown and its surrounding areas are still the most active markets for apartment construction. There’s a new crop of expensive, high-end apartment towers coming on the market, such as the Museum Tower and Ascent, where rents for one-bedroom units can push $2,000. And that’s driving up the median price of rents for downtown residences, which will likely continue to rise until demand slows.