The most expensive cities for renters
Rising rents and shrinking inventory makes the chase for a decent apartment difficult in many cities. Here are the spots where you'll pay the most for a place to lay your head, plus tips for finding the best apartment.
By Melinda Fulmer
It's no secret that renters are getting squeezed. But by how much depends largely on where they put out their welcome mat.
In the second quarter of 2006, rents averaged $896 across the U.S., up 4.2% from the same period a year ago, and occupancy rates averaged 96.2%, according to M/PF Yieldstar, a real estate market research company. It's the first time since 2001 that rents have outpaced inflation on a year-over-year basis.
"It's a landlord's market," said Brad Govier, a manager with the Apartment Guys, a Chicago-area leasing service. "There's a great big pool of people searching for apartments, and much fewer units for rent."
Top markets such as San Jose, Calif., saw rent increases nearing 12% compared to a year ago, while rents actually dipped in a few locations like Greensboro, N.C. (-3%) and Detroit (-1.6%). In fact, rents declined slightly from the end of 2005, when the average rent was $940.
For the most part, though, renters are finding themselves compromising on everything from price and location to amenities -- or all three -- and still facing tough competition for available units.
A painful search
In Los Angeles, Rob Schultz, a 30-year-old carpenter, says there were no deals to be found, even if he was willing to move a little farther out. "I thought we could get something for a steal in an outlying area," he says. But, "They seemed to get the same rents wherever," they were located.
Alex Khromov, a 29-year-old physician who recently moved from New York to Orlando, Fla., says he underestimated that areaâ??s rents by at least $300 a month.
"Orlando rents are becoming more comparable to New York rents," Khromov says. "Anything less than $1,000 is on the third floor with a walk-up."
After a couple of weeks of searching for a downtown market, Khromov says heâ??s resigned himself to leasing a place in nearby Winter Park or Maitland. Rents in Orlando, which tied for the fifth-tightest market with Los Angeles, climbed 7.6% to $837 in the second quarter from the same time a year earlier.
The hottest markets
The three priciest rental markets were, as expected, in the markets with the biggest hurdles to new construction: New York City, San Francisco and Los Angeles.
In Los Angeles, rents climbed 6.5% to $1,586 in the second quarter on an average occupancy of 97.5%.
Rents in already-steep San Francisco, where 97.4% of the apartments were occupied, climbed another 8.8% in the quarter to an average of $1,947, and will almost certainly surpass the $2,000 mark later this year, to rival the tech bubble peak of $2,100 in late 2000.
But the most expensive place for rents was still New York, where 97.1% of the apartments were occupied, at an average monthly rent of $2,469, according to real estate data firm REIS Inc. (M/PF does not track New York City.)
Some of the biggest increases in rents came in areas where the gap between renting and buying was largest, such as San Jose, Calif., and Phoenix, and the major markets in Florida. Experts blame the tight market in Florida on condo conversions, which took thousands of apartment units off the market.
Greg Willett, M/PF vice president of research, also predicts a big jump in rents in Denver this year, where the average $722 rent is far below what it costs to buy in the area.
"Rent giveaways are still quite widespread there. But at some point, property owners are going to realize that rents are way, way below the appropriate levels," Willett says.
Likewise, he believes rents will continue to climb in the San Francisco Bay area and Seattle, where mortgages far exceed monthly rents.
10 priciest cities for renters*
City Avg. rent
Annual rent chng.
Occupancy
New York** $2,469
NA
97.10%
San Francisco $1,947
8.8%
97.4%
Los Angeles $1,586
6.5%
97.5%
San Jose, Calif. $1,487
11.6%
98.2%
Orange County, Calif. $1,387
6.0%
96.8%
Boston $1,332
2.1%
96.7%
Oakland $1,248
5.8%
96.8%
San Diego $1,213
3.1%
97.1%
Washington, DC $1,205
4.5%
97.4%
Fort Lauderdale, Fla. $1,134
9.7%
97.5%
*Source: M/PF Yieldstar; second-quarter snapshot
**Source: REIS Inc.
Some exceptions to rising rents
Rents aren't rising everywhere, of course. Landlords in Greensboro, N.C.; Fort Worth, Texas; and Detroit lowered rents in the second quarter, as occupancy remained flat on a lackluster economy. Rents and occupancy also remained flat in San Antonio, where more apartments had been built in recent years.
But the biggest wild cards in the rental market, experts say, are areas such as Las Vegas, Miami and Fort Lauderdale, Fla. Here, investors snapped up condo conversions for quick resale, only to see the market stagnate.
These units are slowly being added to the rental stock in many markets as their owners find they can't make a profit by selling. This trend could pick up steam, as condo projects started during the housing boom are put up for lease instead.
While no one is projecting rent cuts, Willett says, in some markets "Itâ??s not outside the range of possibilities."
Renters need to be proactive
Until any such decline really takes hold, renters will need to be vigilant in their search. Govier says landlords are renting apartments quickly -- often a month or two in advance of move-in -- so prospective tenants should move fast and start their search early. "Otherwise they're working with the bottom of the barrel," he says.
Los Angeles renter Schultz says it took him several months to find an apartment, mainly because he couldnâ??t get most of the landlords to call him back. "I put out maybe 30 or 40 e-mails and calls. I got two (returned) phone calls total," he says.
Some renters have resorted to bartering for their rent -- hoping cooking or massage services are a way to crack the tight market. (Read more in "Desperate renters go to extremes.")
And forget about any kind of breaks at lease signing. Large apartment owners who used to dole out discounts on rent and security deposits are now discontinuing those deals and upping rents in most markets.
At the beginning of Chicago's peak rental season, which starts in May, the same apartments were getting $40 more a month than last year, Govier says. Three months later, those same apartments were going for a total of $80 more a month.
