If Amazon picks Philly to build its second headquarters, it could mean colossal changes—both good and bad—for the city, including an influx of an estimated 50,000 new jobs. But with potentially thousands of people moving to Philly, what does that means for rents in Philly, a city that consistently touts its affordability?
Rents in the Philadelphia metro will increase an additional 0.6 to 0.8 percent each year with Amazon HQ2, costing a Philly renter up to $6,506 more over the next 10 years, according to a new report released today by Apartment List. Those numbers are on top of the already 3.1 percent average baseline rent growth that Philly has experienced each year from 2005 to 2015.
Compared to the 15 other major metros that Apartment List analyzed, a 0.6 to 0.8 percent additional increase places Philly in the “moderately impacted” category. Meanwhile, fellow Pennsylvania city Pittsburgh, also in the running for Amazon HQ2, would experience a much larger rent hike, estimated at 1.2 to 1.6 percent each year.
How does Apartment List figure all this? Its researchers analyzed data from the U.S. Census and Bureau of Labor Statistics to figure out how much new housing a metro can build, the amount of slack in the housing market, and what the impact would be of such a large influx of high-wage workers.
For Philly, the analysis found that with a vacancy of 9.0 percent, Philly is actually pretty well-equipped to handle the 50,000 Amazon employees, if you compare its current stats to other cities. Take San Jose, for example, whose average rent already rose an astonishing 57 percent between 2005 and 2015. It also has the lowest vacancy rate out of all the 15 metros studied.
Therefore, the researchers suggest that the Philly metro’s population size and high vacancy rate will prevent any extreme rent increases. But, things aren’t all perfect. The researchers caution that rents will still rise no matter what, “due to the difficulty of building in the metro.”
Historically, the metro has issued 10,882 building permits on average each year. That rate would need to increase, says Apartment List, if the metro wants to be able to handle the job growth and new Amazon folks. This finding is in line with a separate report, which found that Philly already isn’t building enough housing—affordable housing, at that—for its projected population growth.
Of course, this report does account for potential Amazon employees opting to buy versus rent. Their expected salaries are estimated to be around $100,000 (Philly’s median household income is currently around $41,000) so they could certainly afford a downpayment a one of the homes in Philly’s market.
It’s a different story though because although the city’s rental market has a decent vacancy rate, the amount of homes for sale in Philly is at an all-time low. That means with Amazon’s influx of workers, even more people bidding to buy a home. Only, Amazon’s employees would likely be able to afford the increased home prices.
Prime Markup: How Much Would Amazon HQ2 Drive Up Rents? [Apartment List]