On the surface, the United States seems to be entering a promising era for renters, with the most significant rise in apartment construction in decades leading to an apparent slowing in rent increases. The median rent increased by just 0.5% in June, and some economists project a modest decline in U.S. rents this year, following a nearly 25% upsurge over the last four years.
However, a closer examination reveals that these benefits are not universal, and for many, the strain of housing costs remains an all-too-present burden. The communities of Metro Detroit (including Wayne County and some parts of Oakland and Washtenaw counties) are well acquainted with this dichotomy. While the median rent in this area has experienced a year-over-year decrease of 1.06% to $1,638, according to rental listings company Rent, this has done little to alleviate the ongoing financial strain for many of its renters, particularly those within the Black community.
Specifically, in Detroit, the median monthly rent is $1,215, while the median household income is $32,498. With the ever-growing list of criteria necessary to secure occupancy (including many landlords mandating that tenants make three times the monthly rent in order to live in their properties), this leaves many Detroiters, especially Black Detroiters, in a vulnerable position as it relates to housing. With the “three times the monthly rent” mandate, the minimum household income for Detroiters would need to be around $44,000 – or an increase of about 40% of the current median income – in order to qualify for housing at the current median monthly rental price.
“People of color in Detroit may be feeling especially financially constrained as Black people are more likely to be renters, and inflation exacerbated these feelings of unaffordability,” said Chief Economist of Redfin, Daryl Fairweather. “However, rent prices still have room to fall this year and next as new construction rentals hit the market and landlords have less room to hike prices, so renters in Detroit may see a little relief in the coming year.”
Fairweather has been at the forefront of expressing the stark reality of the current housing situation affecting not only Detroiters but metro Midwest cities alike. Fairweather, who holds a Ph.D. in Economics from the University of Chicago, brings with her an extensive background in analyzing the economic impact of the real estate market, especially focusing on luxury commercial real estate. Prior to her role at Redfin, she served as an economist at Amazon and Intensity Corporation, where her research helped shape an understanding of market trends and consumer behavior.
Fairweather’s expertise illuminates the intricate dynamics between the boom in luxury apartment construction and the back-end reality of rent inflation that affects everyday people. She emphasizes the need to understand these trends not merely as isolated economic indicators but as a complex interplay that has real-world implications for both urban growth and individual affordability. According to Fairweather, the construction of high-end apartments might attract investment and fuel economic growth in cities like Detroit, but it can also lead to a widening gap in housing affordability. Her insights call for a balanced approach that acknowledges the potential benefits of luxury construction while also addressing the pressing needs of those feeling the pinch of rising rents and inflation.
“While it’s true that rent growth has cooled nationally due to less folks moving and economic uncertainty that burdened everyone over the first part of this year, that’s not the full story,” said Fairweather. “Rents are rising fastest in the Midwest and Northeast right now, so Detroit is a city that’s seeing little rent relief with only modest median decreases.”
For Black communities in Metro Detroit, this data is more than statistics; it is a daily reality. The median U.S. rent has risen from $1,629 in June 2019 to $2,029 in June 2023. Amid this surge, many in the Black community who’ve been disproportionately impacted by economic inequalities are compelled to dedicate an ever-growing percentage of their income to meet the rising rent, further entrenching the economic divide.
The construction boom, although significant, is concentrated on luxury apartments and a few metro areas. This focus does little to alleviate the housing burden on lower-income families, who often see a higher percentage of their income consumed by rent.
The booming apartment construction also presents a mixed picture for millennials, a demographic already grappling with unique economic challenges. On the one hand, the surge in construction, particularly in luxury apartments, may align with the preferences of some millennials seeking modern amenities and urban living. However, the rise in median rents and focus on high-end apartments cast a shadow on affordability for many within this age group. Millennials, often burdened with student loan debt and navigating a competitive job market, may find the options presented by the construction boom out of reach. The concentration of new construction in certain metropolitan areas further narrows the choices for those seeking affordable housing in other regions. As the nation grapples with balancing the benefits of construction growth with the need for accessible housing, the unique needs and challenges of millennials must be part of the conversation.
Millennials much like 28-year-old Detroit native Jada Moore, who rents a one-bedroom apartment in New Center.
“This past April, I was confident in my excitement when I went to renew my lease until I found out the rent increase that would be added after renewal,” Moore said. “Don’t get me wrong: I love my place and adore my surroundings but hey, I’m 28 trying to figure out this thing called life and just when I thought I had it figured out – just a little bit – more money problems fell in my lap. It’s a reality that I just have to adjust to. And that is what makes me feel overshadowed and unseen in this expensive society. I’m just trying to live.”
Inflation is adding another layer of complexity to the rental landscape, especially for those who are already settled in their apartments and have recently received notice of rent increases. Rising costs of living, driven by inflation, are squeezing budgets on all fronts, from groceries to utilities. For renters, particularly those on fixed or limited incomes, this trend compounds the effects of rental increases. When the cost of rent climbs in tandem with other daily expenses, the financial burden can become overwhelming. In an environment where many are still recovering from the financial repercussions of the pandemic, the simultaneous challenges of rising rents and inflationary pressures are heightening concerns and uncertainty among renters across the nation.
Almost 1.1 million apartments are currently under construction across the nation, a pace not seen since the 1970s, according to commercial real estate tracker CoStar.
While increasing apartment supply may eventually moderate rent increases and provide tenants with more living options, the fact remains that a staggering 40% of new rentals set for completion this year will be concentrated in approximately ten high-job-growth metropolitan areas. For many regions, this increase will hardly impact the overall housing inventory.
The trends in Metro Detroit are illustrative of an ongoing challenge: balancing the need for housing with affordability and accessibility.
According to the National Low Income Housing Coalition, the U.S. is short 7.3 million housing units for low-income renters.
Moreover, the new wave of apartment construction, especially in the luxury segment, is more than just a response to housing demands; it represents a strategic economic initiative in metro cities like Detroit. These modern, amenity-rich apartments are attracting a diverse range of individuals, including professionals, entrepreneurs, and those seeking a vibrant urban lifestyle. By drawing more residents to the heart of the city, this construction boom supports local businesses, stimulates investment, and adds vitality to city life. It contributes to the broader revitalization and growth of urban centers, aligning with efforts to enhance the appeal of cities as hubs for innovation, culture, and commerce. However, as cities like Detroit strive to capitalize on this trend, it is vital to strike a balance.
Fairweather mentions the efforts Mayor Mike Duggan has made to eradicate this real-life burden. “Detroit’s mayor has also made improving housing policy part of his agenda and seeks to pass a land value tax that could incentivize more development of apartments,” she said.
The strain of rising rents is deepening long-standing economic disparities. According to Moody’s Analytics, U.S. rents have skyrocketed 135% between 1999 and 2022, while income has grown at a significantly slower rate of 77%.
The housing story in Metro Detroit and elsewhere is one of contrast, with optimism clouded by persistent challenges, especially within marginalized communities. It is crucial to recognize that the relief offered by the current construction boom is, at best, unevenly distributed. More must be done by local governments to ensure that all residents are considered when new housing developments are being considered. And rent caps must be put in place to protect the most vulnerable residents in order to ensure that all residents can enjoy quality living standards at affordable rates.
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