NY Fed Reserve: Lowest Income Renters Subject to Highest Rent Inflation

According to an analysis recently released by the New York Federal Reserve, it looks like rent increases have been highest for those least able to pay. According to the data, for the highest rents in the U.S., rents didn’t change much between 2011 and 2013. For units with the lowest rents in the U.S., places where the poorest Americans live, average rent inflation was 15.9 percent per year.

Developers build where they can turn a profit. That increases supply, and keeps rents from rising as much. In communities where rents are low, it's the opposite. This is the view of economists at the NY Fed, who point out that the source of supply for higher rent units is new construction, whereas the supply of lower-rent units tends to be older, depreciated units. “For the highest-income quintile,” they write, “new construction (10.8 million units) is about 2 and a half times the net increase in housing units (4.3 million units) [between 1989 and 2013]. As one moves down the income distribution, new construction represents a declining share of the net increase in housing units.”