As the rental sector enters what is historically peak leasing season, owners and managers of value-add — Class B and C — properties and newly built or Class A product will look to push rents more aggressively. For recent college grads, this will equate to a difficult environment in which to find “affordable” living.
The majority of recent grads will need to have at least one or two roommates in order to afford median rents in top metros, according to the findings of a recent Trulia report.
In other words, it will be hard for grads to find situations where their rent and insurance will equate to less than 31 percent of a metro’s median income.
“Those who head to the Midwest and Southern states can save the most on rent,” the report stated, pointing directly to St. Louis, Dallas, Houston and Atlanta. In these locales, 18.6 percent, 14.9 percent, 10.4 percent and roughly 8 percent of units are affordable, respectively. To make median rents affordable in these markets, grads would need to have only one roommate.
Another market, Phoenix, is similar to Atlanta in that roughly 8 percent of its units are affordable.
The West, specifically Southern California, stands out as the least affordable region for new grads. Of the top five least affordable metros, three were in SoCal — the Inland Empire, Orange County and San Diego. In these locales, Trulia considers only 2 to 4 percent of units to be affordable. Topping the list of least affordable was Portland, Oregon, where only 1 percent of units are affordable. Miami was also listed, with 4 percent of units cited as reasonable. In these five markets, grads will need two or three roommates to afford median rents.
Gateway markets and large primary cities will represent the locales where grads need to earn the most in order to afford median rents. It’s no surprise that San Francisco, New York City, Boston, Miami, Los Angeles and Chicago all top the list. In these cities, median rents range from $3,500 in San Francisco to $1,770 in Chicago – meaning grad must earn between $70,000 and $137,000.
According to a recent Accenture report, 15 percent of this year’s graduates expect to earn less than $25,000 at their first job. More than half, 58 percent, of the students surveyed will leave school with up to $50,000 in student loan debt.