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Posted over 1 year ago

"Down Renting" reducing the supply of affordable rentals in Worcester

This is a wonderful article shared with my by a colleague yesterday.

2 big takeaways here:

1. Artificial Intelligence and huge amounts of data can help Landlords to maximize rental income. The software in question here "Real Page" takes tons of data and helps property owners determine what rents they can charge to tenants.  They have to "Trust the Data".  People are too nice so they have trouble getting rents as high and saying no.  Computers don't have that problem

What they realized was that you could do 3 things that are seemingly incongruous.

Higher Vacancy + Higher Rents = Higher NOI with less effort.

2. People with Higher incomes are "Down Renting" where they pay less for rent then they can afford

This is something that I have always agreed with.  Just because you make $100k doesn't mean that you should be spending 30% of your income on Rent.  Why not get a roommate or 2 and pay even less.  This is one of the things that is driving up rent in Worcester.  Two young kids making $60k each for $120k household income could be renting for $3000/month at 30% of their income.  If they are renting a 3 BR in Worcester for $1800 a month, are they "TAKING AWAY A LOWER PRICED UNIT FROM A POOR FAMILY "  

Both of these have the impact of driving rents, but I think in the case of Worcester # 2 is having a bigger impact on our local market as young people are waiting longer to buy, and are searching out lower rents so they can save for their down payments.