15 Major Cities That Have the Cheapest Rent in the U.S.
In this piece, we will take a look at the 15 major cities that have the cheapest rent in the U.S. For more cities, head on over to 5 Major Cities That Have the Cheapest Rent in the U.S.
High living costs have pummeled citizens in nearly every country in the world these past twelve months. While inflation in the Western world has remained below 10% for most of the time, in emerging markets it has crossed double digits and unleashed unthinkable economic burdens on vast chunks of populations.
At the same time, while rapid inflation rises are a relatively recent phenomenon ushered primarily due to the fiscal largess during the coronavirus pandemic and the Russian invasion of Ukraine, rents today have been growing for decades. Taking the example of the U.S., data from the Federal Reserve shows that using 1983 as a base year and ascribing it an index value of 100 shows that rents have grown by a massive 288% in the past four decades. In absolute terms, historic median rents stood at $423 in 1985, and at $1,180 as of January 2023 to mark a 178% growth. As is the case with most macroeconomic and financial comparisons, they rarely yield value on their own, so to generate more insight lets compare them with the income growth in America during the same time period. At this front, data from the Census Bureau shows that median income in the U.S. was a little over $50,000 in 1967, and since then, it has grown to $70,784 as of 2021.
In percentage terms, this marks a mere 39% growth - indicating that Americans are paying more of their money simply to rent. To add to this, a 2017 report from Pew Research shows that the number of household heads who were renters grew from 21.3% in 1965 to 43.3% in 2016. This bit of data is interesting, as it shows that the proportion of renters has drastically increased over the past decade. This is due to the fact that while between 1965 and 2016, the percentage of household heads that were homeowners also grew from 36.2% to 75%, it had actually peaked at 76% in 2006 - just before the Great Recession hit.
Rents also jumped last year, as a wave of inflation that might cool down soon now was just about to peak. For instance, in Manhattan, which is one of the most expensive areas to live in the U.S., saw the average monthly rent jump to a whopping $5,000 for the first time in history in July 2022. This came at a time when average rent in America jumped to $2,000 as the pandemic ended up changing the market dynamics. This also marked a 15% annual growth in May 2022, up from the 4% growth in May 2021.
This makes it clear that the real estate market as a whole has been booming for the past couple of years. At the same time, it is also having to deal with changes that appear to be permanent. The pandemic saw vast chunks of populations switch to remote working, and according to research from PricewaterhouseCoopers (PwC), as much as 20% of office real estate properties might have to be repurposed as the demand for working spaces drops. Additionally, trends in the market are shifting from the generally popular coastal areas to the western and southern regions, such as Nashville, Dallas, and Forth Worth.
The American real estate market deserves a keen look from investors since the top most valuable real estate companies in the world are in America. In fact, when taking a look at market capitalization, seven of the largest real estate companies are U.S.-based. These are Prologis, Inc. (NYSE:PLD), American Tower Corporation (NYSE:AMT), Equinix, Inc. (NASDAQ:EQIX), Crown Castle Inc. (NYSE:CCI), Public Storage (NYSE:PSA), Simon Property Group, Inc. (NYSE:SPG), and Realty Income Corporation (NYSE:O). Cumulatively, these firms have a market capitalization of roughly $450 billion, which is greater than the next fifteen companies, most of which are also American.
Additionally, while real estate is generally thought to be related to residential and office spaces, the reality is that there are budding new sectors as well. One of the most lucrative of these is the leasing of warehouses or other spaces for data center operations. In fact, this market is so lucrative that American Tower - the second largest real estate company in the U.S. in terms of market value, makes its living by providing data center spaces.
To understand how lucrative this sector is, consider a research report from Technavio. This report estimates that the global datacenter colocation market is expected to grow by $46.76 billion between 2022 and 2026 at a compounded annual growth rate (CAGR) of 13.96%. Additionally, unlike the broader global real estate market where most of the growth is expected to take place in Asia Pacific and particularly China, for the data center colocation market, 35% of this growth will take place in North America according to Technanvio. This double digit growth rate is reiterated by Vantage Market Research who estimates that this same market was worth $56 billion last year and will sit at $149 billion in 2030 via a CAGR of 12.90%. The research firm adds that North America accounted for 44% of the market in 2021 with retail companies fueling the growth.
The residential real estate market is also worth trillions of dollars. Research from Leanprop shows that as a whole, there are a whopping $2.8 trillion worth homes available for sale in the U.S., with six million homes sold each year. Out of these, the majority are existing homes, and real estate agents pocket a small chunk of this value or $70 billion in commissions. Homes priced between $50,000 and $99,000 account for the bulk of the sales, yet at the same time, homeowners also often find that selling a home yourself is often cheaper. Additionally, the supply of homes is also reducing, as construction costs go up and new buyers often find that old homes are not suited to their liking or needs.
Finally, one of the most important residential real estate companies in the U.S. is Anywhere Real Estate Inc. (NYSE:HOUS), and its chief executive officer and president Mr. Ryan Schneider provided a snapshot of the current residential real estate market recently as he shared:
Now looking back on 2022, it was a rapidly changing year for housing with substantial declines in the market that got worse every single quarter. Effectively all the market decline was from a drop in unit transactions culminating with Q4 market volume down more than 30% Higher mortgage rates continued to put pressure on affordability and these higher mortgage rates are hurting this new supply of inventory as many homeowners are locked into their current home with low mortgage rates. I am incredibly proud how our great agents and franchisees are taken care of customers, even in the midst of this tough housing market as they continued to demonstrate their value in the marketplace.2023 looks like a volatile year where the housing market will be meaningfully lower than 2022 driven by a substantial drop in unit transactions.
Industry 2023 forecast for transactions are typically in the 4 million to 4.5 million unit range down 10% to 20% from 2022 and remember, unit transaction declines have a disproportionate impact on our business as unit declines also impact our mortgage and title opportunities and we’ll see what happens on the price side of the volume and we expect Q1 2023 market volume to be down around 30% versus 2022 where we expect those year-over-year quarterly in comparisons to improve throughout the year. And I still believe the outlook for housing over the decade is strong and most importantly and potentially excitingly right now, we may be at or near a bottom already. We have all seen a number of the housing indicators in the macro economy exhibit more stability.
With these details in mind, let's take a look at the major cities with the cheapest rent in America.
Our Methodology
To compile our list of the major cities in the U.S. with the cheapest rent, we used census data to compile cities with populations greater than half a million. Then, the rent for a two bedroom apartment in these 37 cities was determined through Zumper's rent data, and the cheapest major cities by rent in the U.S. are listed below.
Major Cities That Have the Cheapest Rent in the U.S.
15. Forth Worth, Texas
Rent for a 2 Bedroom Apartment: $1,560
Forth Worth houses close to a million people and is one of the largest cities in the U.S.
14. Fresno, California
Rent for a 2 Bedroom Apartment: $1,550
Fresno is one of the smaller cities in our list, with a population of a little over half a million people.
13. Houston, Texas
Rent for a 2 Bedroom Apartment: $1,550
Houston is the most populous city in Texas and also one of the largest in the U.S. with more than two million people in its borders.
12. Las Vegas, Nevada
Rent for a 2 Bedroom Apartment: $1,550
Las Vegas is one of the most popular tourist destinations in the world, known for its nightlife and casinos.
11. Jacksonville, Florida
Rent for a 2 Bedroom Apartment: $1,450
With a $100 drop in rent over Las Vegas, Jacksonville is one of the cheapest major cities in America in terms of rent. It is also the second largest city in terms of area in the continental U.S.
10. Albuquerque, New Mexico
Rent for a 2 Bedroom Apartment: $1,390
Albuquerque is the most populous city in New Mexico.
9. San Antonio, Texas
Rent for a 2 Bedroom Apartment: $1,360
San Antonio is a major economic hub in Texas and houses several Fortune 500 firms such as Valero Energy.
8. Columbus, Ohio
Rent for a 2 Bedroom Apartment: $1,350
Columbus is the capital of Ohio and houses close to a million people.
7. Tucson, Arizona
Rent for a 2 Bedroom Apartment: $1,300
Tucson is a smaller city with a population of 542,629 people. It has several technology and defense companies.
6. Indianapolis, Indiana
Rent for a 2 Bedroom Apartment: $1,250
Topping the first part of our list of the cheapest major city in rent in America is Indianapolis. It is the logistics center of its state.
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Disclosure: None. 15 Major Cities That Have the Cheapest Rent in the U.S. is originally published on Insider Monkey.