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October 2, 2015
Venture Capital and Rising Rents
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Last year, venture capitalists invested nearly $49 billion in the U.S. While these capital injections fuel local economic activity and job growth, they also contribute to higher rents, according to a new study from real estate start-up Zumper.

In fact, the analysis concluded that for every $1 billion in venture capital injected into a local economy, one-bedroom rents increase $69 per month and two-bedroom rents grow $99 per month.

However, this relationship is even more pronounced in cities such as Boston, New York and San Francisco, whose vibrant tech scenes are drawing loads of venture capital. For example, the study estimates that roughly 33 percent of the rent for a one-bedroom apartment in San Francisco is attributable to the economic activity from venture capital investment.

“When you take a city like San Francisco, which has a fairly small population, and you inject $15 billion into it, that’s going to have a major effect on creating jobs and on population influx,” said Devin O’Brien, head of strategic marketing at Zumper, in an article in the San Francisco Chronicle. “If supply can’t keep up with demand, then rents are going to increase.”

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However, more than just providing a breakdown of the physical character of each city, the analysis also suggests new opportunities to bring more diverse housing types to growing urban populations. Higher density doesn’t have to mean Manhattan-style mega-rises.

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November 17 - 19 Hilton San Diego Bayfront in San Diego, CA
About Apartment Wire
A must-read for top apartment industry professionals, Apartment Wire is a timely review of emerging trends in apartment finance, development, management and technology and more, featuring both exclusive content from NMHC's staff of experts and provocative articles from across the web.
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