Sky-high apartment rents are finally heading back to Earth — slowly. After hitting record highs in 2015, rents grew at an annual rate of 3.7 percent in the second quarter of this year, according to Axiometrics, an apartment analytics firm. That is a healthy gain, but nowhere near the 5.1 percent rise in the same quarter of 2015.
“Annual rent growth is moderating as delivery of new supply peaks and job gains are starting to decline,” wrote Jay Denton, Axiometrics’ senior vice president of analytics.
Rent growth was positive in 49 of the nation’s 50 largest housing markets. Only Houston came in negative, owing to energy industry job losses there and excess construction. On the flip side, Sacramento, California, had the highest rent growth at just more than 10 percent annually. No. 2 was Seattle at nearly 8 percent. Phoenix, Portland, Oregon, Riverside, California, and Fort Worth, Texas, rounded out the top six.
National occupancy is still historically high, hitting 95.2 percent in the second quarter, the first time it’s been more than 95 percent in a year. Demand for rental housing is still very strong, but less so on the luxury side, where there is more supply.
“New graduates are heading into the workforce needing a place to live, and renter families want to get settled in time for the next school year,” noted Denton.
Newly started multifamily construction is less robust than it had been during the last few boom years in the apartment market. As the number of luxury units being delivered soars, the crunch for affordable rentals only increases.
“Because of the widening gap between market-rate rents and the amounts many households can afford at the 30-percent-of-income standard, the number of cost-burdened renters hit 21.3 million in 2014,” noted researchers at Harvard’s Joint Center for Housing Studies in a report released last week. “Even worse, 11.4 million of these households paid more than half their incomes for housing, a record high.”
Another study from the MacArthur Foundation found 4 out of 5 Americans today continue to believe that housing affordability is a problem. Less than one-third said they believe the housing crisis is over.