Apartment Rent Increases Predicted to Continue into 2020
Apartment rent growth is increasing and will likely continue to accelerate into 2020, said Zillow, Seattle.
The October Zillow Real Estate Market Report said year-over-year rent appreciation rates increased in each of the past four months. The typical rent in the U.S. now equals $1,600, a 2.3 percent annualized increase in October and just under yearly highs.
Single-family home inventory fell 6.3 percent annually, the biggest drop in 18 months, Zillow noted. That shortage of available house inventory could keep more people in the rental market, increasing demand and pressure on rents.
“Despite some fearful headlines, the U.S. economy keeps on trucking, and that is reflected in the continued rent growth across the country,” said Zillow Director of Economic Research Skylar Olsen. “The unemployment rate remains near record lows and wage growth keeps adding to renters’ pocketbooks.”
Olsen noted the story of today’s rent growth is not just a few expensive “superstar” cities. “Rather, growing demand for rental housing is bumping up against limited housing supply and low vacancies all across the country,” she said.
Yardi Matrix, Santa Barbara, Calif., said the apartment sector’s extended strong performance has produced one side effect: legislation in three states to limit rent growth and pressure to act in more states. “After a period of below-par growth in housing stock, the U.S. needs more units built, but rent control moves the needle in the opposite direction,” the firm’s Multifamily National report said.
So far in 2019, Oregon, New York and California all passed measures to limit rent increases and more than a dozen more states are considering new rent control laws, Yardi Matrix said. The report called rent control a “counterproductive solution” that reduces investment and limits new supply.
“It’s possible to overstate the short-term impact of rent control on the institutional commercial real estate market, but these laws are likely to prove counterproductive over time,” Yardi Matrix said. “Limiting rents on tenants that stay in place increases the cost burden on those who move or enter the market for the first time. It limits the amount of new development, which exacerbates affordability by decreasing the amount of stock. What’s more, if repairs aren’t funded, it will lead to a deterioration of existing stock.”
State legislatures should address the affordable housing crisis, Yardi Matrix said. “But the best solution involves making it easier to build units that low- and middle-class households can afford,” the report said. “That means reducing exclusionary zoning, allowing more density, alleviating red tape and fees for developers and subsidizing developments.”