Three major themes are influencing rental housing prospects this year: rental shortages, post-pandemic lessons, and regional migrations. Considering these will help you more easily navigate finding your next rental.
Charles Tassell, COO
National Real Estate Investors Association
Three major themes are influencing rental housing prospects this year. The first of these is a legacy problem growing over the past several years: building too few rental properties over the past decade. The shortage of new rentals has resulted in a demand that cannot be met, forcing prices higher. At the same time, many single-family housing rental properties are being sold to owner-occupants as market prices have also jumped higher. Some of those sales are due to buyer demand, but a fair number are also due to an aging housing provider demographic that doesn’t want the risk of COVID or want to deal with an ever-increasing regulatory stranglehold added by local & state governments.
With increasing construction costs on everything from lumber to logistics to, of course, workers — when they can be hired — new rental property development is facing the double jeopardy of tighter credit financing and longer development processes due to numerous NIMBY (“Not In My Back Yard”) anti-development efforts. All of these constraints mean new developments are unlikely to relieve pricing pressure until demographic factors, such as the smaller and smaller generational bumps of Gen Z and following, begin rolling through in the next couple of years.
Post-pandemic effects
The second key influence has been the lessons learned from the pandemic. Roommates wanted more space (and fewer roommates) and were willing to pay for it. Urban areas felt the impact of work-from-home efforts, as those who could work from home were more willing and able to secure their own larger rental space. Hence, a traditional one-bedroom occupant will now rent a two-bedroom unit, utilizing the second room as an office. This spreading out continues to support higher occupancy rates.
The third major influence has a more regional impact, as migrations toward Southern cities have grown substantially. The influx of northerners to cities like Orlando and Dallas has steadily increased, with U-Haul statistics reflecting the migration. Additionally, with work-from-home and tax fatigue growing, some high-tax areas like the Northeast and California have seen an exodus of residents choosing to relocate to more rural areas and those that are less wallet-burdening. The key here is internet accessibility, as many rural areas are less than well-connected. To that end, Congress and the Administration are funding broadband access, but that takes time.
Additional rental considerations
Some of the more personal concerns for those seeking rental options are the variety of choices in amenities and even the size of a complex in which to live. While many larger buildings will offer more amenities, the privacy and community aspects can be more complicated, or even non-existent. Beyond just the monthly rental price, asking about additional fees — monthly, yearly, and per-use — as well as the utility costs, can provide a better perspective on the real cost of the rental. With lockdowns and viral contagions on the public’s mind, as short-term rentals garnered a quicker return to usage than larger hotels, so too have single-family rentals and smaller apartment buildings seen increased interest.
Finally, when considering your next rental home, be sure to investigate the responsiveness of the property owner and staff. Are there systems in place for handling emergencies? Is the housing provider local or an out-of-town, faceless, and semi-nameless corporate entity with limited accountability? Every property will have problems, but how they are handled will make a world of difference.
Lastly, don’t ask about safety; no one can legally answer that. Do your homework!
