Which Small Asset Renter Segments Have the Highest Household Incomes?
Evaluating household income by renter segments helps apartment investors better position and price their units. In the case of small properties, married couples and individuals sharing rental units have significantly higher incomes.
Household Income Levels Across Asset Size
Household income metrics are critical to the leasing decisions of property operators. While income levels provide an indication of competitive unit pricing, income growth can help identify future demand segments.
Within the broader multifamily market small property households have lower incomes compared to those living in large buildings.
As shown below, small asset household incomes were nearly 20% lower than that of large asset households in 2015.
Within the small property market, households with the highest income levels included married couples ($65,000) and those living with room-mates ($63,000).
Growth in Household Income
Hedging against the uncertainties over rent defaults and vacancies constitutes a major challenge for property operators. Household income growth metrics can help inform these bets.
Small property annual household income grew 5.0% over 2014-15, which was slightly lower than that of large building households. This, along with general lower income levels, is likely a function of larger assets skewing towards locations in urban corridors — areas that have seen more job growth during the economic recovery.
That doesn’t mean that there is not substantial growth within small asset renters.
As shown above, among small property renters, households with roommates and ‘Other Family’ households (which includes single parents) experienced the strongest income growth at an annual rate of 6.2%.
While Baby Boomers and Seniors were the fastest growing small building population segments, they also experienced slower income growth, as represented by the Married Couple and Singles Living Alone categories. At the same time, the benefits received by senior citizens provide a degree of income and rent stability.
One last positive takeaway is that household income growth exceeded the average rent growth during the 2014-15 period — 3.1%, according to Reis — for all small asset household categories.