It seems as though nearly every day there are new articles or blog posts discussing rental trends. Oftentimes, the trends highlighted in these posts and articles appear to contradict one another. This inconsistency likely traces not only to the different sources of analysis but also differences in the underlying data. In many cases, it is less about one piece being more correct than another and more about different research teams measuring different pieces of information, making for incongruent comparisons of the trends.
Given this nuanced data landscape, here are four things that the NMHC research team considers when reading these types of articles to determine what the findings truly show.
- Housing types. The big question to ask
is whether the piece is discussing only professionally managed apartments or
are all housing types (i.e., owned and rented, single-family housing, small
apartment properties, etc.) included in the analysis? NMHC most often defines
apartments as rental units in buildings with five or more units, but others
include rental units in buildings with two or more units. Most government data
are not broken down further than the “5+” delineation.
Similarly, most government data sources publish data in terms of units in a building, which is quite different than units in a property. For example, a garden-style property of 20 units could have four buildings of five units or two buildings of 10 units, which would affect the data analysis. There are some private data providers, however, that track data about apartments at the property level; these are usually known as investment-grade apartments and tend to be properties with a larger number of units.
Having a clear understanding of the housing type being measured is critical because rent growth and vacancy rates can vary by structure type, shaping analysis. Single-family rentals and smaller properties typically have a higher vacancy rate than professionally managed apartments; professionally managed apartment property managers most often use leasing software that helps them capture the best rent growth-vacancy rate balance.
Likewise, there can be variation between government rates and those published by private data providers. The U.S. Census Bureau’s vacancy rate for apartments with five units or more has been between 7 percent and 10 percent in the past few years; in contrast, private data providers that track investment grade apartments have reported vacancy rates in the four to five percent range.
- Underlying data source. Data can come
from a multitude of sources-survey research, government data, listings on a
company’s website, internal company data and even a compilation of sources. While
all are valid ways of measuring trends, they can measure vastly different data
Survey research that is gleaned from employees of private data firms calling individual properties, for instance, often captures asking rents, while government data captures the rents current residents are paying to live in their units. Asking rents can differ from actual rents because they fail to take into account the rents being paid by long-term residents or concessions; residents can often pay different rents based on their lease term as well.
Each different source can have its advantages. Data from private surveys or data from aggregated online listings can be more timely than the government surveys, which can be published a year or two after the data are actually collected. The government surveys, in contrast, can include rents for residents that have been living in their units for a long time and capture other characteristics of interest to researchers.
- Geographic area(s). Just like rent
growth and vacancy rates can vary by structure type, those trends can also vary
by geography. The Western region of the country has typically had faster rent
growth than the Northeast and the Mid-Atlantic, for example. A headline based
on rent growth data from California would likely differ dramatically from a
headline focused on rent growth data from the Washington, D.C., area.
Additionally, a so-called national study may in reality not always include
everywhere in the United States; it may only be looking at the most populated
metro areas or cities.
- Context of the findings. Slight changes in wording can result in widely different interpretations of results. A story reporting a decline in rent growth is different than a story reporting a decline in rents. In the first story, rents are still increasing, but at a slower rate than previously, while in the second story, rents are declining. It’s important to pay attention to those contextual details.
While considering these factors in concert with reported trends can help clarify the takeaways, it can often can raise more questions. In such case, we recommend digging into the next layer of information, which might be the original published article, the longer report upon which the article is based or even the website of the company that collected the data.