GHC Thematic Report: Rent Appreciation in Cleveland Hints at Positive Future for Investors

According to a recent article about shifting rental markets in the U.S., Cleveland has topped the list of cities with rising rents. As of July 2020, one-bedroom apartment rentals in Cleveland increased to $940 a month on average. This makes Cleveland one of the 23 cities that, since July of 2019, have witnessed double-digit rent appreciation—an unprecedented incline after nearly a decade of negligible increase in northern Ohio.

Between July of 2019 and July of 2020, Cleveland witnessed a 16% Y/Y increase in rental prices. This attests to a larger, nationwide shift in residential real estate that has been furthered by COVID-19. Data gathered by Zumper of more than 1 million active listings revealed that 60 of the top 100 domestic rental markets booked rent increases between 2019-2020.

Investors are questioning how these rent appreciation trends will impact supply and demand, especially in secondary markets like Cleveland where income tax collections are down by about $7 million and an economic slump is anticipated.

Factors in the U.S. such as the newly large-scale remote workforce as well as the fact that 30 million people are currently claiming state or federal unemployment insurance means that affordable housing options will be in high demand among renters. 

“Part of what we’re seeing is people leaving some expensive markets and moving to cheaper markets, maybe moving back home, ... either because they lost their jobs or because they’re allowed to work from anywhere,” the article speculated.

For investors, this movement among renters creates new opportunities for class B & C multi-family properties, which will likely grow in appeal. Although a 16% Y/Y rent appreciation will inevitably cause prices to steepen in some areas of northern Ohio, it also opens the door for investors to capitalize on affordable housing opportunities that are conscientious of the challenges renters are currently facing.