High-Income Renters Return to Urban Core, but Not at Expense of Suburbs

Here’s more good news: High-income renters are returning to city centers, but NOT at the expense of the suburbs. Renter incomes are up 13% since March 2020 in the suburbs and 15% in central business districts nationally.

When lockdowns hit in 2020, we saw a big drop in income levels among new apartment renters moving into urban core apartments. There was concern around “suburban flight,” and a potential boomerang down the road. What’s happened, though, is more “both/and” rather than an “either/or.” Both urban and suburban apartments are thriving in 2021. Occupancy rates in both urban (96.4%) and suburban (97.5%) areas top pre-pandemic levels.

How is this happening? Our theory: COVID-19 likely “fast-forwarded” moves from city centers that were going to happen anyway over the next couple of years. Lockdowns accelerated those decisions, and those households are staying in the suburbs. At the same time, vaccines and the re-opening of cities (city life itself – if not always in-office employment) re-opened the funnel of young, higher-income renters who prefer the downtown living lifestyle. Another likely contributor could be young adults who temporarily moved out to stay with family and now are boomeranging back into cities. Either way, it’s apparent the 2020 city move-outs did not create merely a temporary suburban bubble.

Renter household incomes are captured at the time of lease signing. In November, incomes reached $117,000 in central business districts nationally versus $67,000 in suburbs. Incomes reflect the wide difference in rent, so rent-to-income ratios are similar – both in the low 20% range.

One other note: Rents cratered in 2020 in many urban areas, while holding flat or even growing in most suburbs. But that gap is leveling off. New lease-over-lease rent growth measured 17% in the suburbs versus 14.2% in urban areas in November. And renewal pricing actually grew more in urban areas than in suburbs – 10.9% versus 9.1%. That premium, in part, reflects highly discounted leases signed in urban areas in 2020, now being renewed at rates closer to market.