With 2016's housing market defined by rising home prices, low inventory, and an increasing demand for urban living, it probably comes as no surprise that rents have been on the upswing across the country.
But in a nation where cities such as New York and San Francisco have garnered widespread attention for explosive residential-rent growth, there's one thing that may be slightly more unexpected: Last year, Philadelphia experienced the second-highest average monthly rental increase of all U.S. cities.
According to a new report issued by the apartment-search website Abodo, rents within the Philadelphia city limits rose an average of 4.2 percent month-over-month throughout the course of 2016, trailing only Columbus, Ga., which experienced monthly growth at nearly 5 percent. Meanwhile, the national average for rent prices saw modest monthly gains at only 0.67 percent, a rate Philadelphia outpaced nearly six times over.
With Philadelphia's average one-bedroom rent hovering at $1,182 last year, according to Abodo, the cost of living in the city still remains far cheaper than many other large metro areas in the United States, including Seattle, Washington, D.C., and Newark, N.J. Still, such large monthly gains propelled Philadelphia's average rent higher by hundreds of dollars throughout 2016, ending the year with an average December rent of $1,341 after starting in January 2016 at $839.
The rapid gains here now place Philadelphia far above the nation when it comes to average prices of one-bedroom apartments. In December, the average national rent was $1,034, Abodo said, more than $300 cheaper than Philadelphia's year-end price.
By some measures, Philadelphia's steep rent increase makes sense: Luxury apartments have inundated Center City, offering residents highly amenitized living at more expensive prices. At the same time, home values in the city spiked in the first quarter last year to pre-recession levels — an indicator that is good news for homeowners, but one that also makes buying more difficult for first-time or low-income shoppers.
"House prices have been galloping upward so quickly over the past 18 months," Kevin Gillen, a senior research fellow at Drexel University's Lindy Institute for Urban Innovation, said Tuesday. "A lot of houses are really out of reach for these first-time buyers."
Currently, Abodo found, Philadelphia's average rent is $1,350, ranking it the 19th-most-expensive city in the nation. Topping the list in January 2017 was San Francisco, where average rent is currently $3,526. New York, at an average price of $2,935 a month for a one-bedroom, followed closely behind.
"We're still an affordable city compared to other cities," Gillen said. "But that's because our incomes are so low."
Indeed, as rents have spiked in Philadelphia, concerns about affordability have increasingly emerged. Philadelphia has the highest rate of deep poverty — people with incomes below half the poverty line — of any of the nation's 10-most-populous cities, the U.S. Census Bureau found in 2014. According to census data, Philadelphia's deep-poverty rate is 12.3 percent, while the city's overall poverty rate is about 26 percent. A family of four is in poverty if it has a cash income of about $24,000, while deep poverty is defined by that same family taking in $12,000 or less.
Nationwide, Abodo predicts, rents will likely continue to rise, driven by revitalization of urban centers. However, Gillen said he expects the Philadelphia market to soften.
"We have so much new product that needs to be absorbed," he said. "It will either moderate rents or put downward pressure on them."