Platform · Glossary
Rent growth.
Rent growth is the annualized rate 3Y uses to model potential changes in rental income over time.
3Y supplies a local default based on available rent data. You can override it when you have a different supportable assumption.
Rent growth is different from the property’s current monthly rent. Current rent establishes the starting income level; rent growth determines how that income changes in the projection.
What 3Y sources it from
3Y uses two complementary public sources for rent analysis:
- HUD Small Area Fair Market Rents, or SAFMRs, provide annual bedroom-specific rent data and the historical series used for modeled rent growth.
- Census American Community Survey rent data provides tract-level rent context and helps establish current rent levels.
HUD publishes SAFMRs by ZIP Code. 3Y uses the HUD-USPS ZIP-to-tract crosswalk and residential-address weights to resolve those observations to local tract geography.
Current rent levels combine HUD and Census information where appropriate. Modeled rent growth is based primarily on the historical HUD SAFMR series, with the local Census rent trend used as a fallback where a usable HUD growth value is unavailable.
How 3Y calculates it
The growth calculation uses the 2-bedroom HUD SAFMR as a consistent local trend anchor across years.
3Y calculates:
- an 8-year HUD SAFMR compound annual growth rate, representing the longer-term local trend; and
- a 3-year HUD SAFMR compound annual growth rate, representing more recent rent movement.
The recent rate receives 65% of the blend and the 8-year rate receives 35%. The result is then capped at the 8-year rate.
modeled rent growth =
min(
8-year HUD SAFMR CAGR,
65% × 3-year HUD SAFMR CAGR
+ 35% × 8-year HUD SAFMR CAGR
)
This allows recent cooling to lower the modeled rent-growth assumption while preventing a short rent surge from lifting it above the 8-year HUD trend.
Why local rent growth matters
Rental conditions can differ substantially across nearby markets. A national rent-growth figure can provide broad context, but it does not describe the income trajectory of a particular local market.
3Y resolves rent growth locally so the assumption used for a property reflects the surrounding area rather than a single national average.
Two properties with the same current rent can produce different modeled outcomes when their local rent-growth assumptions differ. The property with faster modeled rent growth may generate more future income, but that outcome remains dependent on tenant demand, affordability, property condition, management, new supply, and broader economic conditions.
Where it appears in a 3Y analysis
Rent growth contributes to:
- the Rental market portion of the 3Y Location Score™; and
- the property’s long-term cash-flow projections, where modeled rent changes affect future income, cash flow, and projected return on investment.
Rent growth is an assumption, not a guarantee that rents can be raised, that tenants will accept an increase, or that future market rents will follow the modeled path. Investors should consider lease restrictions, local law, tenant turnover, property condition, affordability, and competing supply when testing the assumption.