A vacancy rate is the percentage of rental units that are not occupied.  Vacancy rates are one indicator of the need and demand for housing in a certain market area.  An increase in vacancy rates in rental housing indicates a surplus of housing space.

Typically, as the occupancy rate increases, rental rates tend to increase and apartment renters, who have been waiting to buy homes of their own are given the impulse to start looking for houses for sale and to move out of apartments.

To calculate the occupancy rate, divide the number of occupied units by the total number of units in the building.

Example: Assume that 100 apartments are rented in a 150-unit apartment building.

100 rented units / 150 total units = .66 or 66 percent occupancy

To calculate the vacancy rate, divide the number of vacant units by the total number of units in the building.

Example: Assume that 200 units are rented in a 250-unit apartment building.

250 total units- 200 rented units= 50 vacant units

50 vacant units/ 250 total units = .20 or 20 percent vacancy rate