Read the latest Yardi Matrix Affordable Housing Market Report.
How affordable and market-rate competitiveness affects performance and what are its driving forces, according to Yardi Matrix data.
Report Highlights
- Market-rate and affordable housing competitiveness varies greatly at a macro level, but also on a submarket-by-submarket basis.
- The metric affects income-restricted performance, whereby highly competitive markets tend to register lower occupancies.
- The absolute level of market rents, supply growth and age of stock influence a market’s competitive levels.
- Of the top 30 U.S. markets, one-third was highly competitive, while another was moderately matched-up and the remaining had no competition.
Competition affecting affordable housing performance
With construction and financing costs on the rise, efficient, affordable capital deployment becomes paramount. One key factor to consider before underwriting a project is the competitiveness between market-rate and income-restricted properties, which directly impacts affordable housing performance. A study of Yardi Matrix’s national database, comprising 23 million units, of which 3.5 million are affordable, found that competition varies both across regions and at a submarket level. This phenomenon occurs when income-restricted and market-rate rents are considered affordable to households earning similar incomes. Rates are deemed affordable if they do not exceed 30% of gross household income, based on government standards.
The data provider’s research registered that one-third of the top 30 U.S. metros were highly competitive, where at least half of the market-rate units’ rents overlapped with their income-restricted counterparts. Another third was found to be moderately matched, with 25% to 50% of conventional apartments in competition, while the remainder had less than 25% of market-rate units overlapping, including seven markets where competitiveness levels were zero. Although each metro had its own unique factors, the study identified several key drivers correlating to the competitiveness between market-rate and income-restricted properties.
Absolute market rents, supply growth and age of stock influenced the level of rental overlap. Markets where the average advertised asking rates surpassed $2,500, including New York City, San Francisco, Los Angeles and Miami, had sparse competition. Conversely, metros with rents under $1,500, such as Las Vegas, Columbus, Houston and Detroit, presented moderate to high levels of overlap. Somewhat tying into the previous factor, supply growth fostered a competitive environment as it stifled rent growth in markets such as Austin and Dallas. Lastly, the age of a market’s inventory influenced the level of competition. Metros with newer construction, which tends to concentrate in higher-end luxury product, drove less rental overlap. The reverse is also true, exemplified by Detroit and Baltimore, where an aging stock softened market-rate rents, spurring on more affordable competition.
Competitiveness varies within metros
The study found the same wide competitiveness variance at a submarket level within metros. In Boston, which had a 0% overall competitive score, several northern outer suburbs, such as Amesbury, Newburyport and Townsend, posted higher rental overlaps on account of the age of stock and distance to the city center. Similarly, moderately matched-up metros can contain areas with less competition. Take Denver for instance, where the downtown and outer suburbs’ higher-quality product commands rents in excess of $2,500, drawing less rental parity with the affordable housing sector.
Competitiveness becomes a key variable as it correlates with affordable housing occupancy. Most markets bearing high market rents and low levels of overlap registered an occupancy rate upward of 95%. The reverse was also true, as highly competitive markets with rents below average had the index between 93% and 94%. Therefore, to ensure the complex capital stack is deployed efficiently and purposefully, developers ought to account for every metric, especially competitiveness, before committing to a project.
Read the full Yardi Matrix Affordable Housing Market Report: September 2025.
Add Comment