Income and Rents: It Takes Money to Make Money via Property Management Insider

As apartment rents continue to trend higher, real estate economists are worried income growth isn’t keeping up. After all, an increase in rent means residents are forced to allocate a higher percentage of their income to housing if their paychecks don’t also increase proportionately. Investors, especially in Class B and C assets, are worried that the ability of renters to pay higher rents is nearing a ceiling. As such, investors across all product segments have become more focused on metros with higher wage growth expectations – a backdrop necessary for higher rents moving forward.

At the metro level, the best indicator for wage growth is the average hourly earnings, as reported by the Bureau of Labor Statistics. However, the data is limited – the time series for average hourly earnings at the metro level only goes back to 2007. Since that dataset lacks coverage over multiple real estate cycles, let’s focus on personal income to assess income growth.

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