The Importance of Median Household Income

We use City Data databases to find the past 20 years of Median Household Income (MHI) data and use this as one metric when we’re looking at which market(s) to invest in. Here’s why.

MHI is a key economic indicator that provides information about the financial well-being of a population. It represents the midpoint of a population's income distribution, meaning half of households earn more than the median income and half earn less. The growth rate of median household income is important in multi-family housing syndication because it provides insights into the overall health of the local economy and the purchasing power of residents.

We use the growth rate of median household income to assess the potential rental income growth and thus, returns from investments we make. Properties located in areas with high and growing median household incomes are often more attractive to investors because they offer the potential for higher rental income and stronger demand for housing. Properties located in areas with declining median household incomes may be seen as less attractive investments because they carry a higher risk of declining rental income and weaker demand for housing.

The growth rate of median household income is also an important factor in determining the creditworthiness of tenants. Tenants with stable and growing incomes are generally more likely to pay their rent on time and maintain good credit scores. On the other hand, tenants with declining incomes may struggle to pay their rent and are more likely to default on their lease agreements.

Want to learn more about how we do what we do? Head on over to our For Investors page!