Property tech company RealPage’s “Analytics Blog” posted a “report” today entitled “Market-Rate Apartment Renters Spending 23% of Income Toward Rent”, available here. The report itself is rather slight in length, coming in at only 12 pages on the PDF, and is moreover simplistic in terms of, uh, “analysis”, if you want to call it that.
On the whole, the report has clearly been deployed to tamp down fears of dramatic rent increases which have been simmering for a while nationally by offering a blanket statement that things aren’t really that bad. This is accomplished by some depressingly workmanlike pseudo-statistical practice: firstly, by working with a closed garden dataset derived from their own product (the RealPage property management software), which then goes entirely unexplained in the report, and secondly, by exclusively depending on averages. No kidding. RealPage is basing these claims on a 7 million sample dataset, pulled from property managers’ records of household income and agreed rents from lease applications, using these to calculate rent-to-income ratio, and then finding the median ratio. Further, this only applies to new lease signings, not renewals.
A bit tangential, but it’s important to note that the use of a one-shot data entry in the form of the initial signing is an issue constantly in CPI discussions precisely because of the “lag” or “sticky” quality of rents, which do not necessary fluctuate with respect to inflation more generally due to their more static “durable consumption” nature – basically, rent is not actually tethered to increases in overall consumption because, of course, it is almost always an agreed-upon figure determined and locked in at the time of signing. This is a problem when your report claims to be an up-to-the-minute measure of, to be Marxist about it, tenant exploitation, as you may imagine.
Secondly, there are methodological issues surrounding the use of a proprietary, essentially black-boxed, survey-based dataset, but more salient here, I think, is the fact that despite masquerading as a sample of US households (though they do hedge their bets by claiming to only represent professionally managed apartments), we are in fact being treated here to a particular subset of renter households who live in properties which can afford the minimum $1.50 per unit per month payment the software requires. While that may sound small, RealPage specializes by targeting itself towards 2,000+ unit portfolios. Greystar (768,000 units in portfolio), RPM (112,000 units), and Flaherty & Collins (7,000 units) are all featured on the company’s case studies page.
This is further illustrative in terms of which property managers are treated as survey respondents; we may say rather confidently that the dataset likely tends to favor landlords with large portfolios and at least some semblance of a “home office” workforce, featuring paid staff, eating further into the “pure” rent as surplus value extracted from each tenant. This becomes further problematic when the dataset is taken to represent Class A, B, and C properties, but we are not given numbers for each particular class or the internal logic used to sort these ambiguous categories. I would reckon that the Class C dataset, which are “typically more than 20 years old and located in less than desirable locations…generally in need of renovation, such as updating the building infrastructure to bring it up-to-date” and thus looked askance at by investors, is likely much smaller than A and B, with the majority of the collected data being considered Class A. But there’s no way to know because there’s no methodology included!
Finally, to the actual data. The central figure here is the rent-to-income ratio, and it is to be celebrated for its holding steady at 21.9% nationally (with a minor ±5% swing in either direction locally). As the report notes, this is cause for celebration, with 33% being the generally accepted point at which a household is considered “rent burdened”. Rejoice! “Market-rate apartment renter incomes have soared since the pandemic, keeping rent-to-income ratios much lower than widely assumed.” Of course, with the above considerations in mind, this should be obvious. This is a pulse check on the middle-class, basically, which enjoyed historically unprecedented employment prospects during of the pandemic as lower-wage workers tumbled into the reserve army of labor altogether. When the report notes that there is an “inverse relationship between apartment rent level and affordability”, this should give pause. It continues: “the higher the rent, the more affordable it is to those target renters. On the flip side, renters in lower-priced apartments are spending a larger share of income toward rent”. Again, what is celebrated here as a sort of rising tide lifting all boats is in fact one of a particular wealthy (six figure income) renter enjoying their fortune while the screws continue to turn for most others.
To repeat myself, there is competition between suppliers and consumers. The economic picture described in the RealPage report is one in which the market is being dominated by wealthy consumer-renters, who are “able (and willing) to pay the rent”, and given the squirrelly nature of this particular report’s data usage, come to stand for the health of the entire national rental market. Put another way, the report by design focuses on an economic actor who is not experiencing hardship and is enjoying the boom of luxury housing, precisely as the majority of people are slipping further and further into deeper and deeper rental exploitation. In Whitney Airgood-Obrycki, Alexander Hermann, and Sophia Wedeen’s essay “The Rent Eats First”, which uses Economic Policy Institute, the US Census, and American Community Survey data to capture 30.1 million working-age households, they have quite a different finding: the average household in their survey is short by on average $25,000 a year, including rent and common household expenses, totalling a national deficit of $471 billion. Their rent burden share numbers are damning:
Gradated by income, according to the essay, households making less than $15,000/year are on average $34,000 a year to make up the difference between costs and income, those making between $15,000 and $30,000 would need $24,000, and even households making $75,000 and up would need an additional $14,000 to close the gap. Compare this to RealPage’s little report, which offers us the breathless imputation that there exists a horde of wealthy renters making six figures, because their calculations have the average apartment built after 2010 renting for $2,167/month, and figuring in the 23.2% rent-to-income nationally, arrive at a imputed $112,000 a year income. These are profoundly unserious people.