Did the Washington Post’s Story on Rising Rents Use Flawed Data? If So, What’s Really Happening?
Last week, we featured a new story in the Washington Post that claimed rents in major metro areas were falling for high-end units, while rising for the low-end. The piece set off a flurry of online discussions among housers. Joe Cortright of City Observatory published a response on Monday questioning the paper’s interpretation of Zillow data to draw its conclusions.
First, Cortright notes, the “Zillow Rental Index” is calculated by estimating rents for single-family homes, condos, and co-ops—including those that are owner-occupied. It does not include estimates for multifamily apartments, which is a huge omission.
Second, he argues that the three “tiers” within the ZRI suffer from a composition effect: because the low, mid, and high rent tiers are created by evenly dividing the database into three parts, as new homes change price and/or come online over time, the make-up of these tiers changes significantly. This could obfuscate actual trends in rent values.
While Cortright concludes by connecting additional supply in Portland to lower rents at all tiers, it will take more research on submarkets across other metros to fully validate—or refute—the article.
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