Renters: You're paying more for less space

New apartments hitting the rental market are smaller and more expensive than they were ten years ago. Learn more about the causes and how it affects your budget.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print

If you feel like the walls are closing in on you, you might be right.

New apartments hitting the rental market in 2016 are 8% smaller than they were 10 years ago, according to a recent report from online rental marketplace RentCafe.

Meanwhile, rents for all apartments on the market have risen 7% in the last five years.

This year, the average square footage of all new apartments, including studios, one-bedroom and two-bedroom apartments, was 934 square feet. Just a decade ago, the new units coming online offered an average of 1,015 square feet.

The national average for rent this year is $1,296 compared to $977 in 2011.

The report analyzed data from buildings in the 100 largest U.S. cities that have at least 50 units.

The biggest losers were new studio apartments, which have shrunk by nearly 18% since 2006 to an average 504 square feet this year.

One bedroom apartments are also getting smaller: shriveling 5% to 752 square feet from 794 square feet 10 years ago.

But not everything in the rental market is getting smaller.

Two-bedroom apartments have held relatively steady, increasing 1% to 1,126 square feet in the last 10 years.

Developers have faced higher construction costs recently, especially in bigger cities, thanks in part to rising land costs and increased regulations.

Fitting more units in a building tends to bring a higher return on investment (similar to when airlines pack more seats on a plane).

Developers had hit the pause button on building in the wake of the 2008 housing crisis. The average size of a rental took its biggest hit from 2011 to 2012 when the size shrunk 2.8% in a single year.

Demand for rentals has been on the rise as millennials delay homeownership, baby boomers look to downsize, home prices continue to rise and more people choose to live in cities.

"Most of the new apartments that are going up are in central areas, downtown, and there isn't a lot of space there, so developers are building up," said Ama Otet, RentCafe's real estate editor.

But rents have been rising faster than wages recently, which has created an affordability issue for many renters. Last week, a report from the Joint Center for Housing Studies of Harvard University showed more than 21 million people spend at least 30% of their paycheck on rent—a record high.

Topics:
  • Renting
  • Saving and Spending
  • Renting
  • Saving and Spending
  • Renting
  • Saving and Spending
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Google Plus
  • Print
This article was written by Kathryn Vasel from CNN Money and was licensed as an article reprint from June 28, 2016. Article copyright 2016 by CNN Money.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and not legally affiliated.
The images, graphs, tools, and videos are for illustrative purposes only.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917.
768848.1.0
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.

Here's what we suggest you explore next

Taking your wallet on vacation? Here's how to keep it safe

Tourists are often targeted by pickpockets or thieves. Read here to learn how you can keep your wallet safe on vacation.

Like your checking account, but with some useful extras

All ATM fees reimbursed. No minimum balance. Pay bills. Deposit checks.

You might also like

Five money musts for college grads

One more lesson for recent graduates: How to manage money.

The real costs of dog ownership

Dog ownership is rewarding but costly. Read here to understand the true cost of dog ownership, and how you can budget your dog's expenses into your personal finances.

What to do if your spouse isn't frugal

Read here to learn how you can align your finances with your spouse's.
Financial Checkup

Got 5 minutes? Get a financial checkup now

Answer just nine questions and we'll help you prioritize your financial to-dos, including smart moves to consider for your next dollar. Get your action plan now.