Photo (cc) by emilykneeter
If you’re looking to stretch your rental dollar, steer clear of San Francisco.
According to Forbes’ 2015 rental rankings, the Bay Area city, which has an average monthly apartment rent of $2,802, earned the dubious distinction of being the worst city in the United States for renters.
California cities swept six of the top 10 spots, with San Francisco, Oakland and San Jose in the top three spots, on Forbes’ worst rental cities list. Forbes said a housing shortage and lack of competition makes renting difficult in many parts of California.
The vacancy rates in the worst renting cities are low. San Francisco is at just 3.6 percent rental vacancy, Oakland has just 2.9 percent vacancy and San Jose has 3.5 percent.
“The tightness of the rental market means that landlords can keep raising prices, which is why rental costs in each metro area have skyrocketed over the last year: San Francisco by 12.8 percent, Oakland by 10.5 percent, and San Jose by 11.3 percent,” Forbes noted.
“What makes a market unfavorable for a renter is not just the amount of rent and its relationship to income levels, but the vacancy and availability of units,” Hessam Nadji, chief strategy officer and director of specialty groups at Calabasas, California-based real estate investment firm Marcus & Millichap, told Forbes. “Property owners get a pricing power that is exceptional when vacancy falls below 5 percent. That’s when rent increases accelerate.”
According to Forbes, these are the 10 worst cities for renters:
- San Francisco.
- San Jose.
- Los Angeles.
- San Diego.
- Northern New Jersey.
- Orange County, Calif.
- Palm Beach, Fla.
Manhattanites’ spend 53 percent of their household incomes (average $74,915) on rent. Ouch. Forbes said rent in Manhattan is the highest in America’s biggest cities, at an average of $3,290 per month. Manhattan also has a tight 2.3 percent vacancy rate, which doesn’t help matters. Forbes said:
The one piece of bright news is that rents have gone up only 3.4 percent year-over-year. The bad news is that’s because rents are already just about as high as the market can bear, says Gary Malin, president of Citi Habitats, one of New York City’s largest residential rental brokerages, adding that without salary growth rents can’t push a lot higher.
On the flip side of the coin, Indianapolis, Kansas City and Las Vegas were named the best cities for renters.
For a complete list of the best and worst cities for renters, click here.
Forbes used this criteria to compile their rankings: average rent, vacancy rates, average share of household income spent on rent, and the year-over-year change in rents.
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