Rent prices are slowing and even dropping but it’s mostly good news for the rich.
Between April 2015 and April 2016, the pace of rent increases slowed in at least 90% of luxury ZIP codes in Atlanta, Los Angeles, New York, and San Francisco, according to data compiled by Zillow.
In those same areas, rental prices for the less affluent are slowing at a much slower rate.
The same trend also held in Boston, Houston, San Diego, and Charlotte, N.C., as well, said Aaron Terrazas, a senior economist at Zillow.
Some areas have experienced slowdowns for both the wealthy and less wealthy renters. Washington, D.C., witnessed rent increases that have been soft across the board, and in Seattle, rents are still increasing in expensive neighborhoods and cheap ones alike.
Why are cheaper rentals increasing in prices at a faster rate? There has been a shift from homeownership to rentals in recent years. In the first three months of 2016, 36% of US households lived in rental homes, according to the Census Bureau, up from 31% during the same period in 2005.
The sudden ship to rental properties increased the median rental price from $600 to $870.
As more affluent renters move into major urban areas, in the meantime, there has been a drastic increase in rental property construction aimed at affluent renters. That has led to an increased supply of luxury apartments which has driven down prices.