Rising Wages Powering Rent Gains Among Philly’s Class B and C Apartments

For U.S. workers without a college degree, the years immediately following the Great Recession were particularly hard times. From 2010 through 2012 their wages grew by about 1.7 percent annually, just barely fast enough to keep pace with rising prices as measured by inflation.

After nine consecutive years of economic growth the situation is gradually changing.

For lower paid workers, navigating obstacles such as rapidly rising healthcare and education costs still remains extremely challenging. But predominately lower paying sectors like retail trade, healthcare and social assistance, and leisure and hospitality have added a combined 10 million jobs nationally since 2009. This, combined with baby boomers, one of America’s largest generations, reaching retirement age means that the pool of unemployed workers is shrinking fast.

The U.S. unemployment rate is currently at a more than 45 year low and given the minimal supply of available workers, companies are being forced to increase wages to meet their staffing needs.

For college educated workers, wages continued to rise ahead of the rate of inflation even during the worst years of the financial crisis in 2008 through 2010. But thanks to tightening labor market conditions, according to the Federal Reserve Wage Tracker data, even wages for high school graduates (without a college degree) began rising at 2.5 to 3.5 percent annually in 2015, a pace which they have maintained since.

It’s no coincidence that just as this acceleration in wage growth for lower skilled workers began, apartment rents among Philadelphia’s 2- and 3-Star apartment properties also began growing at a faster pace.

If the U.S. economy can avoid falling into recession over the next 2 to 3 years, labor market conditions will remain extremely tight. Continued 2.5 to 3.5 percent wage growth among lower paid workers would provide a healthy foundation upon which owners of more affordable rental properties could continue to increase rents.

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