Rent Stratification: 30% to 300%
When examining specific markets, MPF Research shows that rents in one city a Class A apartment might cost only 30 percent more than a Class C, and in another, nearly three times as much.
Reasons for this rent stratification, as MPF calls it, are new properties coming online over recent years. They’ve tended to be in urban core centers – more expensive than other types of properties, and demanding a more affluent renter base.
Even in the suburbs, developers have favored mid-rise communities with garage parking over low-rise projects with surface parking – again, more expensive and necessitating higher-end renters.
Among the country’s 100 largest metros, the highest-tier Class A apartment on average rents for $1,663, approximately twice the $850 cost of a Class C apartment. But drill down to view individual markets and you find some in which the “haves” pay even bigger premiums over the “have-nots.”
The largest variances tend to be in big coastal cities and their outskirts (with Chicago thrown in as well). Only these areas can support the kind of salaries necessary to soak up Class A apartments that can cost – in the case of New York, for example -– over $4,500 per month to rent.
MPF reports that what is surprising about these markets is not the high rents, it’s the dramatic drop from Class A to Class C.
In Boston, Southwest Connecticut and New York, for example, rent is approximately 2½ times as much for a Class A apartment than a Class C. Lifestyle differences between those on the sunny side of the street and those who are struggling along with the rest of middle-America is most striking in these areas.
Accordingly, the rent differential diminishes in the less populous, slow-growth areas, where there is a much smaller pool of affluent renters in big-money jobs living high above those at the bottom. Areas with relatively modest rent differences include Harrisburg, El Paso, Tucson, Albuquerque, Omaha and Providence. In these communities, Class A apartments get a premium of less than 50 percent over Class C.